AGI – The economy may not recover quickly e poverty continue to increase, while the reduction of greenhouse gas emissions could only be a temporary phenomenon. A forecast of the consequences of COVID-19 starting with those of five major epidemics of the century, and how pandemic recovery plans should align with sustainability goals.
This was revealed by a study conducted by RFF-CMCC European Institute on Economics and the Environment (EIEE) and the International Monetary Fund which estimates that the economic impact of COVID-19 will continue to have its effects felt in the coming years, based on an analysis of the consequences of five major epidemics previously occurring over the past century (SARS, H1N1, MERS, Ebola and Zika).
“This pandemic has taken everyone by surprise,” said Massimo Tavoni, director of the EIEE Institute and professor of climate economics. “We have seen several other epidemics in the recent past, with important and dangerous repercussions on economic and social sustainability. In this study, we examined these events as lessons to understand what should be done differently this time“.
The researchers estimated how past pandemic events have affected the affected economies and societies noting, following these events, significant and persistent reductions in GDP, together with increases in unemployment, income inequality and the debt-to-GDP ratio.
“Past pandemics have had a significant and persistent impact on the economy, society and the environment,” explains Johannes Emmerling, lead researcher of EIEE’s Low Carbon Pathways unit and first author of the study. “In terms of energy demand and greenhouse gas emissions, the effect was mainly cyclical and did not lead to systematic efficiency improvements. “Research shows that, if energy demand and CO2 emissions drop significantly during a pandemic event, this is mainly due to the persistent decline in economic activity rather than due to to structural changes in the energy sector.
Only around one third of the recorded reduction in CO2 emissions can be attributed to the decarbonisation of energy, an insufficient share to contribute significantly to building a greener economy: without targeted policies, the positive effects on the environment linked to a pandemic crisis are destined not to take root.
“Applied to the current COVID-19 crisis – continues Emmerling – the results suggest that without a clear environmental focus of recovery packages, the reduction of emissions will be mostly transitory”. Using these historical estimates to track the likely impact of the COVID-19 pandemic, the study predicts a significant reduction in economic performance and effects in the distribution of income up to 2025.
“The combination of the impact on economic growth and inequality has led to an increase in poverty of about 75 million people in 2020, and again policies are key to reversing this process,” Emmerling said, specifying that these estimates are likely to be on the downside, being the COVID-19 pandemic more widespread than the average of the health crises of the sample considered and the containment measures undertaken to limit the unprecedented contagion. These projections, the authors say, indicate the need for a strong political response to counter the prolonged negative effects of COVID-19.
However, fiscal and other macro policies must be calibrated for fair and sustainable growth. Furthermore, there is a need for a “green” planning of the destination of the extraordinary resources allocated, so that they do not aim only at address the economic and social impacts of the pandemic but they also guarantee a reduction in energy intensity and emissions in the medium and long term, at the same time allowing to reduce the costs of future climate change mitigation actions.