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The collapse of economic activity due to the new cororavirus crisis gave a new impetus to debates on the relationship between economic growth and environmental sustainability, with some researchers suggesting that more people may be saved from the reduction in air pollution than dying from the pandemic. This is a rather short-sighted view that does not fully account for the impact of economic crises on the environment. Air pollution is indeed a global health emergency, with 9 out of 10 people breathing polluted air, leading to 7 million deaths each year (WHO). A key driver of air pollution is economic growth. The collapse of economic activity, as a result of the unprecedented measures of social-distancing and population lockdown, led to an immediate collapse of the air pollutant nitrogen dioxide (NO₂) that is emitted by burning fuel (cars, transportation, industry), clearly evident in satellite images on China, Europe, as well as traffic data around the world).

Yet, these images and data, that have been widely circulated in press, offer a very short-sighted understanding of the impact of the Covid-19 crisis on both air quality and environmental sustainability. We recently studied a wide range of episodes of sudden slowdowns in economic activity, associated with financial crises, and their impact on air quality. In particular our sample included 419 financial crises (see Laeven and Valencia, 2018) in more than 150 countries over the period 1970–2014, and their impact on Carbon Dioxide (CO₂), Sulphur Dioxide (SO₂), Oxides of Nitrogen (NO_x) and Particulate Matter (PM_2.5)]. Our main findings are as follows:

The break-out of financial crises impacts indeed positively on air quality. The intensity of the economic slowdown is a key driver of the magnitude of the impact.

The break-out of financial crises is associated with reductions in CO₂, SO₂ and NO_x emissions, while when a crisis is accompanied by an output loss, the reduction in the above emissions is much stronger and extends to PM_2.5 (Figure 1). Clearly, the rate of growth is a key determinant of air quality. A slowing down in growth rates not only intensify the reduction in CO₂, SO₂ and NO_x emissions, but also trigger a reduction in particle emissions (PM_2.5) that are especially dangerous for human health.

As expected, the impact of the economic slowdown on air pollutant emissions is contingent on the stage of economic development and the broader economic structure of each country. For instance, while financial crises in high income countries are accompanied by higher-than-average reductions in CO₂, SO₂ and NO_x emissions, we find no impact on any of the pollutant emissions in low income countries (see Figure 2).

Yet, the beneficial effect of these crisis-driven economic slowdowns on air pollution is short-lived. 

Not only it fades away the second year after the break-out of the crisis, but in the medium-term appears to lead to increases in PM_2.5 emissions (see Figure 4). In particular, the positive impact on CO₂ emissions disappears the year after the break out of the crisis, whereas for SO₂, NO_x and PM_2.5 emissions the positive impact disappears the second year after the break-out of the crisis. It is worth noticing here that this happens regardless of whether the involved countries continue to be in a financial crisis or not. Indeed out of more than 400 financial crises in our dataset, more than 55% have a duration of 3 or more years, whilst the most frequent duration in the dataset is that of 5 or more years (approximately 37 percent of the total). Thus in most cases the financial crises outlive the short-term positive impact that their break-out had on air quality. Equally important, for the only pollutant that we find evidence for a medium-term effect is for PM_2.5; but the impact is negative for air quality. In particular, we find that four years after the break-out of a crisis and up to year 10 after the crisis there are increases in PM_2.5 emissions, between 0.9 and 1.8 p.p.  

Our findings seem to concur with latest satellite images from China, where, shortly after the relaxation of lockdown measures, NO₂ emissions are on the rise again (Table 1) – in a much shorter time horizon than one would expect. 

Table 1: NO₂ pollution levels in China.

Source: FT

This should alert us all of the potential destructive environmental consequences of a V-shape economic recovery that will be based on restoring environmentally unsustainable economic practices. Moments of crisis are also moments of opportunity to reflect on where we want to go from here, how we can achieve a sustainable living. Currently, the focus of the debate is how fast we can ‘run’ after the end of lockdown measures – whether it is going to a V-shape U-shape or L-shape economic recovery. Focusing on ‘speed’ without discussing direction or destination has been disastrous in the past and this time has the capacity to push our fragile socioenvironmental system beyond the point of no return. Equally, as the above findings demonstrate, the ‘new normal’ of low economic growth in the post Great Financial Crisis period, exacerbated by the current Covid-19 shock and collapse in economic activity, will not by themselves improve environmental sustainability. The rate of economic growth is a key driver of air pollution, but not all modes of growth slowdown offer a sustainable solution. To make it safely out of this unprecedented crisis, we urgently need a new vision about the economy and the future.

This blog is part of the

SSRP Forum: the Pandemic and Sustainability 

This forum aims to contribute to the analysis of the impact of the pandemic on sustainability and the Sustainable Development Goals (SDGs), and to offer policy recommendations on how to respond to this unprecedented challenge. 

The spread of coronavirus (COVID-19) presents us with an unprecedented challenge. We see losses of human life around the world, while one can hardly think what will happen if and when the pandemic reaches poorer countries with weaker economic and health structures. We see countries shutting down their economies to avoid the spread of the virus, as well as employing unprecedented measures of social distancing and population lockdown. We see whole economic sectors and households entering the intensive care of public financial support. In less than a month, the pandemic has redefined the priorities, parameters and boundaries of ‘what is possible’ in much of the world that we constructed since the Second World War.

The most urgent question is how to deal with the humanitarian crisis currently evolving and prevent it from getting out of control at a global scale. But a question we must also face is how the currently unprecedented mobilisation of public resources will be used to support our transition to a sustainable future, rather than a return to a socio-environmentally unsustainable past. One can hardly overstate the urgency of both these tasks. We in the Sussex Sustainability Research Programme (SSRP) community aim to contribute to this ‘mobilisation’ effort by setting up this Forum which aims to bring together experience, knowledge, ideas and recommendations to inform public responses to the pandemic and the implementation of Sustainable Development Goals (SDGs) at both local and global levels.

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