COVD-19 Impacts on Decarbonization Forecasts

IMF forecasts the coronavirus pandemic to shrink World GDP by 6% in 2020. The lingering effects are expected to  reduce World GDP in 2050 by 9%, relative to its potential in pre-pandemic forecasts, but still reaching double its current size.

The pandemic will reduce energy demand through to 2050 by 8%, according to model run for the linked report. Improvements in energy intensity will remain the most important factor in reducing energy demand in the coming decades, and the contraction due to COVID-19 comes on top of this. It is expected transport energy use will not reach 2019 levels again due to behavioral changes in light of travel restrictions and shifts in employment/commuter practices. It is projected oil has also reached a supply plateau, and reduced return on capital and the increased volatility in fossil fuel prices is creating more skepticism in the market for fossil fuel futures.

However, the key to reaching the Paris goals remains policy, which represents the main uncertainty as to whether the pandemic will speed up or slow down the energy transition.