Energy and Economic Effects of the COVID-19 Pandemic: History
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Contributor:
Yugang He
,
Ziqian Zhang

The COVID-19 pandemic has caused disruption to the original order of the global economy and has had an influence on the social and economic growth of countries all over the globe.

  • energy consumption
  • economic growth
  • system generalized method of moments

1. Introduction

Because of the COVID-19 pandemic’s outbreak, the economy of the whole globe has been going through a period of uncertainty. Of course, the COVID-19 pandemic has come to have a substantial impact on the economies of OECD countries as well as the supply of energy. This is significant since the OECD is an important organization that handles the challenges of social, economic, and political governance generated by global instability such as the COVID-19 pandemic. The global supply chain, investor confidence, consumer spending, and the tourist sector are all impacted by the COVID-19 pandemic, based on the OECD countries’ report on the economic forecast for 2021. It has a greater impact on prominent trade partners of China, such as Japan and South Korea. As a result of the COVID-19 pandemic, the OECD estimated that worldwide economic growth would be 2.4% in 2022 (down 0.5% from the previous year), and 1.9% in the United States, 4.9% in China, 0.8% in the euro zone, and 0.2% in Japan. Similarly, as a direct consequence of the COVID-19 pandemic, OECD countries have unavoidably experienced a substantial shock to their energy supplies. The energy markets in the OECD countries have been severely thrown off balance as a result of substantial disruptions caused by insufficient energy supply and increasing energy prices during the COVID-19 pandemic.
Therefore, according to the foregoing study of the existing situation on this topic, this work examines the energy and economic impacts of the COVID-19 pandemic between the first quarters of 2010 and 2022, using OECD countries as examples. When conducting empirical studies employing the approach of the system generalized method of moments, the following findings emerged. First, renewable energy use increased by 1% during the COVID-19 pandemic (January 2020 to January 2022), but economic growth declined by 0.014%. Second, economic prosperity promoted renewable energy consumption during the COVID-19 pandemic. Third, a 1% rise in fossil fuel energy consumption during the COVID-19 pandemic is expected to lower economic growth by 0.064%. Fourth, during the COVID-19 pandemic, economic growth was the main motivation for fossil fuel energy consumption. Moreover, the assessment of heterogeneous effects is used for further discussion. Before and after the COVID-19 pandemic, the connections between energy consumption and economic development are seen to be heterogeneous.

2. Effect of the COVID-19 Pandemic on Energy

The COVID-19 pandemic has presented a significant set of difficulties for the energy industry. Therefore, a large number of researchers started using a wide variety of samples and approaches so as to investigate the influence that the COVID-19 pandemic has on energy. Aruga et al. [1] explored how COVID-19 confirmed cases influenced energy consumption in India by assessing whether the release of lockdown had a favorable effect on energy consumption and whether wealthy areas recovered their energy consumption faster than poorer ones. They observed that there was a long-run association between the number of COVID-19 confirmed cases and energy consumption by using the autoregressive distributed lag approach. Furthermore, they also found that the COVID-19 confirmed cases had a beneficial influence on energy consumption. Subsequently, Kang et al. [2] investigated how changes in energy consumption occurred in South Korea because of the COVID-19 pandemic. After conducting an empirical investigation using parametric statistical techniques, they discovered that energy consumption during the COVID-19 pandemic was lower when compared to the energy consumption during the previous year. Meanwhile, Wang et al. [3] identified the influence of the COVID-19 pandemic on energy consumption based on fresh insights derived from the discrepancy between the pandemic-free scenario and real power usage in China. Using the back propagation neural network and autoregressive integrated moving average for empirical research, they revealed that the COVID-19 pandemic had led to a 29% decline in China’s electricity use. With a sample of commercial tourism cities, Zhang et al. [4] also found that the COVID-19 pandemic did affect urban energy consumption. López-Sosa et al. [5] undertook research to investigate how the COVID-19 pandemic affected energy consumption at 13 different state institutions in the Mexican state of Michoacán. The use of electricity has been assessed prior to and during the 2019–2020 presence of COVID-19. They discovered a significant drop in electricity use, resulting in an average monthly savings of 76.24 MWh, which equated to a reduction in emissions of roughly 497 TnCO2e every year from 2019 to 2020. Furthermore, these results were supported by García et al. [6][7][8][9].

3. Effect of the COVID-19 Pandemic on the Economy

The COVID-19 pandemic has ravaged the worldwide economy, leaving a significant portion of the global population poor. In addition, the epidemic has produced considerable economic and social policy uncertainty. As a consequence of the COVID-19 outbreak, the Korean economy has suffered tremendously. On the basis of this context, He and Wang [10] examined the macroeconomic influences of the COVID-19 pandemic. They discovered, using impulse response function analysis, that Korea’s key macroeconomic variables can be significantly affected by the COVID-19 pandemic in the short run but not in the long run. Vitenu-Sackey and Barfi [11] explored the influence of the COVID-19 pandemic on the world economy using 170 countries and econometric panel methodologies, such as ordinary least square and robust least square regression. They found that economic growth was negatively affected by the COVID-19 pandemic. Moreover, Alam et al. [12] conducted analyses to determine the possible effects that the COVID-19 pandemic could have on the economic situation in Bangladesh. They discovered that the COVID-19 pandemic had significant effects on the various economic indicators of Bangladesh, particularly the bank and financial institutions, foreign remittances, local trade, gross domestic product, international trade, and employment. Ikram et al. [13] investigated how the COVID-19 outbreak influenced exports of products and services in the Asian nations that were hit the most, including Pakistan, Indonesia, India, Bangladesh, Iran, and the Philippines. Using a conservative model for empirical study, they found that the COVID-19 pandemic had a negative effect on international trade so as to affect economic growth. Meanwhile, Soava et al. [14] conducted research to evaluate the idea that the COVID-19 pandemic had an effect on Romania’s gross domestic product and assessed the information to assess whether or not the theory was supported. An examination of the development of these indicators over the period spanning 2007–2020 was carried out by using a time series on quarterly gross domestic product as well as a multi-linear regression model. They verified that the shock of falling activity resulting from the COVID-19 pandemic had a significant negative effect on gross domestic product in the first half of 2020, with a slight rebound. In addition, these results were aligned with Burger and Calitz [15][16][17][18][19].
In conclusion, the aforementioned studies explored the influences of COVID-19 on energy consumption and the economy by employing a variety of approaches and examples. Compared with this previous literature, the approach of generalized method of moments is employed and OECD countries are used in this work to explore the consequences of the COVID-19 pandemic on energy consumption and economic growth, and to examine the heterogeneous effects between economic growth and energy consumption before and after the COVID-19 pandemic.

This entry is adapted from the peer-reviewed paper 10.3390/su141912043

References

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