Headline: The effects of economic crises on carbon emission peaks and structural change in OECD and G20 countries

Economic disruption associated with the Covid-19 pandemic and the current energy and – potentially economic – crisis related to the war in Ukraine emphasize the importance of understanding and managing crises’ immediate and lasting effects on decarbonisation. Theory shows that the expected effects of crises are contested and could be supportive or detrimental to decarbonisation. This article examines the timing and mechanisms for how countries peak emissions and whether such peaks are related to economic crises. We empirically investigate the timing of CO2 emissions peaks in OECD and G20 countries 1965-2019, and the effects of major economic crises on the activity-related and structural drivers of emissions. We show that in all but two countries that have peaked emissions, the peak occurred just before or during a recession, by the combined effect of lower GDP growth and decreasing energy and/or carbon intensity during and after the crisis. In peak-and-decline countries, crises have typically magnified pre-existing improvements in energy and carbon intensities. Almost all peaking countries have returned to economic growth post-crisis, implying that structural change – not lost economic activity – was the critical driver of emission peaks. In non-peaking countries, the GDP growth was less affected, and structural change effects were weaker or rather increased emissions. Crises do not automatically trigger peaks but may strengthen ongoing decarbonisation trends through several mechanisms.

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Bersalli, G., Tröndle, T., & Lilliestam, J. (2022). The effects of economic crises on carbon emission peaks and structural change in OECD and G20 countries.

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