OECD Technical Expert Workshop on Modelling the Impact on Circular Economy and Low Carbon Transitions of the Covid-19 Recovery Packages

1. Recovering from Covid:
rebound but no return
Rob Dellink
Environment and Economy Integration Division
OECD Environment Directorate
Contributions by Grace Alexander, Ruben Bibas, Elisa Lanzi, Eleonora Mavroeidi,
Daniel Ostalé Valriberas, OECD Environment Directorate; Christine Arriola,
Frank van Tongeren, OECD Trade and Agriculture Directorate
Technical workshop, 13 April 2021

2. Modelling Covid-19 pandemic and recovery
• Purpose: assess the effects of Covid-19 pandemic and recovery on a range
of environmental pressures using the ENV-Linkages dynamic model
• Three main sources of input:
– Economic Outlook by the Economics Department (March
2021): Changes in macroeconomic variables, incl. GDP and
unemployment; IMF World Economic Outlook for developing countries
– Calculations by the Trade & Agriculture Department (Jan.
2021; work in progress): Detailed sectoral, regional and trade
shocks – Preliminary results kindly shared with us
– World Energy Outlook by the International Energy Agency
(Oct. 2020): Changes in energy demand
• Recovery: 2021-2025 GDP forecasts (OECD-IMF) & market recovery

3. GDP growth rates recover quickly but effects on
GDP levels are long-lasting
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2015 2020 2025 2030 2035 2040
GDP level (deviation from
pre-Covid baseline)
Level Covid scenario (deviation from baseline)
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
2015 2020 2025 2030 2035 2040
GDP growth rate
(annual)
Pre-Covid baseline Covid scenario

4. Big variations across regions and sectors
-15% -10% -5% 0%
Canada
USA
OECD Latin Am.
OECD EU 22
Other OECD Eur.
OECD Pacific
OECD Oceania
Other Latin Am.
Non-OECD EU
Non-OECD Eur.
M.East&N.Africa
Other Africa
China
India
Other Non-OECD Asia
World total
2020
-15% -10% -5% 0%
Canada
USA
OECD Latin Am.
OECD EU 22
Other OECD Eur.
OECD Pacific
OECD Oceania
Other Latin Am.
Non-OECD EU
Non-OECD Eur.
M.East&N.Africa
Other Africa
China
India
Other Non-OECD Asia
World total
2040
-15% -10% -5% 0% 5%
Agriculture
Iron and Steel
Construction
Motor Vehicles
Petroleum and coal products
Electricity
Land transport
Pharmaceuticals
Accommodation & food services
Chemical products
Rubber and plastic products
Total
2020
-15% -10% -5% 0% 5%
Agriculture
Iron and Steel
Construction
Motor Vehicles
Petroleum and coal products
Electricity
Land transport
Pharmaceuticals
Accommodation & food services
Chemical products
Rubber and plastic products
Total
2040
Deviations from pre-Covid baseline projection

5. Global environmental pressures all decline, but
follow sectoral and regional patterns
Deviations from pre-Covid baseline projection
-12%
-10%
-8%
-6%
-4%
-2%
0%
2015 2020 2025 2030 2035 2040
GHG emissions
CO2 All GHG
-12%
-10%
-8%
-6%
-4%
-2%
0%
2015 2020 2025 2030 2035 2040
Air pollutants
PM2.5 NOx CO
NH3 NMVOC SO2
-12%
-10%
-8%
-6%
-4%
-2%
0%
2015 2020 2025 2030 2035 2040
Materials use
Metals Minerals
Biomass Fossil fuels
-12%
-10%
-8%
-6%
-4%
-2%
0%
2015 2020 2025 2030 2035 2040
Land use change
Harvested area
Forestry production

6. A slow recovery scenario
Scenario assumptions: no 2021 TFP rebound; recovery rates halved
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2015 2020 2025 2030 2035 2040
Covid scenario
Agriculture Manufacturing
Energy/constr./util. Services
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2015 2020 2025 2030 2035 2040
Slow recovery scenario
Agriculture Manufacturing
Energy/constr./util. Services
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2015 2020 2025 2030 2035 2040
Slow recovery scenario
CO2 PM2.5 Metals Harvested area
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2015 2020 2025 2030 2035 2040
Covid scenario
CO2 PM2.5 Metals Harvested area
Deviations from pre-Covid baseline projection

7. Full recovery analysis
• Current analysis only includes market recovery: rebound effects
and reduced capital accumulation
• This workshop can hopefully bring relevant info on how to specify
the government recovery packages
– Macroeconomic effects: productivity stimulus, government debt
sustainability
– Structural effects: changes in demand, sectoral stimulus and trade barriers
– Explicit effects on the environment beyond effects on (green) sectors?
• There is a need to shift from “Covid shocks” to “Covid-inclusive
baselines”
– If possible update the SSP scenarios!?

8. Thank you!