Assessing Short-Term and Long-Term Economic and Environmental Effects of the COVID-19 Crisis in France
Paul Malliet, Frédéric Reynès, Gissela Landa, Meriem Hamdi-Chérif, Aurélien Saussay
Abstract
In response to the COVID-19 health crisis, the French government has imposed drastic lockdown measures for a period of 55 days. This paper provides a quantitative assessment of the economic and environmental impacts of these measures in the short and long term. We use a Computable General Equilibrium model designed to assess environmental and energy policies impacts at the macroeconomic and sectoral levels. We find that the lockdown has led to a significant decrease in economic output of 5% of GDP, but a positive environmental impact with a 6.6% reduction in CO 2 emissions in 2020. Both decreases are temporary: economic and environmental indicators return to their baseline trajectory after a few years. CO 2 emissions even end up significantly higher after the COVID-19 crisis when we account for persistently low oil prices. We then investigate whether implementing carbon pricing can still yield positive macroeconomic dividends in the post-COVID recovery. We find that implementing ambitious carbon pricing speeds up economic recovery while significantly reducing CO 2 emissions. By maintaining high fossil fuel prices, carbon taxation reduces the imports of fossil energy and stimulates energy efficiency investments while the full redistribution of tax proceeds does not hamper the recovery.