Unintended consequences of COVID-19 public policy responses on renewable energy power: evidence from OECD countries in the EU.

ABSTRACT

Since 2020, governments around the world have implemented many types of public policies in response to the outbreak of COVID-19. These dramatic public policies have substantially changed production and consumption activities, thereby temporarily lowering electricity use and greenhouse gas emissions. This study argues that pandemic-induced public policies have unintentionally slowed the transition to renewable energy use in the EU since the decline in greenhouse gas emissions due to the lockdowns helped countries temporarily reduce their total emissions. We employ a fixed-effect model to investigate the effects of different types of COVID-19 public policy responses on electricity production, consumption, and net imports in 12 OECD countries in the EU, and we mainly focus on the share of electricity production from renewable energy sources. Among several public policy responses, stringent lockdown policies, such as workplace closures, stay-at-home requirements, and restrictions on gathering size, have negative and statistically significant impacts on electricity generation and consumption. Furthermore, countries with stringent lockdown policies are more likely to import electricity from other countries to mitigate the electricity shortages in their domestic markets. Importantly, we find that lockdown events have negative and statistically significant effects on the share of renewables in electricity production while increasing the share of fossil fuels in electricity production. In contrast, economic support policies such as income support, debt relief, and economic stimulus programs help reduce the share of fossil fuels in electricity production and decrease the net import of electricity from other countries. Our results indicate that the public policies implemented in response to the outbreak of COVID-19 have mixed effects on the transition to renewable energy sources in the EU, suggesting that the current decline in greenhouse gas emissions comes from the reduction in electricity use due to lockdown events instead of the adoption of renewable energy use and discouraging the transition to renewable energy sources.