The Impact of Direct and Indirect COVID-19 Related Demand Shocks on Sectoral CO2 Emissions: Evidence from Major Asia Pacific Countries

Abstract

COVID-19’s demand shocks have a significant impact on global CO2 emissions. However, few studies have estimated the impact of COVID-19’s direct and indirect demand shocks on sectoral CO2 emissions and linkages. This study’s goal is to estimate the impact of COVID-19’s direct and indirect demand shocks on the CO2 emissions of the Asia-Pacific countries of Bangladesh, China, India, Indonesia, and Pakistan (BCIIP). The study, based on the Asian Development Bank’s COVID-19 economic impact scenarios, estimated the impact of direct and indirect demand shocks on CO2 releases using input–output and hypothetical extraction methods. In the no COVID-19 scenario, China emitted the most CO2 (11 billion tons (Bt)), followed by India (2 Bt), Indonesia (0.5 Bt), Pakistan (0.2 Bt), and Bangladesh (0.08 Bt). For BCIIP nations, total demand shocks forced a 1–2% reduction in CO2 emissions under a worst-case scenario. Given BCIIP’s current economic recovery, a best or moderate scenario with a negative impact of less than 1% is more likely in coming years. Direct demand shocks, with a negative 85–63% share, caused most of the CO2 emissions decrease. The downstream indirect demand had only a 15–37% contribution to CO2 emissions reduction. Our study also discusses policy implications.