Deutsche Bank analysts pointed out that unlike in 2009, when the recession mainly impacted manufacturers, the services sector is severely hit this time, too. The Leibniz Institute for Economic Research (RWI) in Essen, meanwhile, cut its forecast less drastically, predicting a decline in GDP by 0.8 percent in 2020.
Lockdown helps curb emissions
The pandemic's economic impact will likely be more profound than during the financial crisis, as all regions of the world are affected, and because it is both a supply and demand crisis. Energy use is faltering as many European states are in a state of lockdown to contain the spread of the virus, but it is difficult to extrapolate the effect on emission.
“The CO2 intensity of electricity is lower today than it was in 2009, meaning that a decline in power consumption might have a smaller impact than it did then," said Martin Cames head of energy at the German Öko-Institute. "On the other hand, the oil price collapse, falling prices for coal and cheaper emissions certificates could boost demand for fossil fuels – for example coal demand in power stations at the expense of gas."
In China, emissions plunged 25% below normal levels as a consequence of the pandemic and analysts expect this trend will replicate around the globe. Germany could see emissions fall between 50 and 120 million tons in 2020 depending on the depth of the economic slump.
Re-energizing after the crisis?
Though the virus-induced standstill helps curb energy consumption and emissions, analysis of earlier crisis shows that such a temporary drop in emissions does not help in the long run.
"If you look at the economic crisis, the slump with low emissions was followed by an even stronger economic upturn and higher emissions. Consumption was partly reversed and then caught up," Germany's Environment Agency said, adding that a sustainable restructuring of the economy was needed.
"Financial support to bolster the economy should hence be aligned with climate targets and the EU Green Deal,” analysts urged. For example, a blast furnace that has to close should come back as a [low-emission] plant when demand rises again. Or the car factory for combustion engines, which has now come to a standstill, should start up again as an electric vehicle factory.