Preventing carbon emission retaliatory rebound post-COVID-19 requires expanding free trade and improving energy efficiency

Existing studies have shown that the COVID-19 pandemic caused a sharp drop in carbon emissions in 2020. A recent example of the impact of sudden extreme events on carbon emissions occurred in the 2008 global financial crisis, in which carbon emissions droped in 2009, but jumped in 2010. This study is aimed to discuss how to prevent the retaliatory growth of carbon emissions post COVID-19 through learning the lessons from analysis of short-term and long-term drivers of carbon emissions. This study explored the short-term (annual) effects (population scale. affluence level, carbon intensity, energy intensity) of changes in carbon emissions by decomposing carbon emissions in the world, different income groups and selected countries before and after the 2008 financial crisis using LMDI technique. In addition, this study explored the long-term effects (energy consumption per capita, energy structure, energy intensity, foreign direct investment, and trade openness) of changes in carbon emissions by decomposing carbon emission in the world and different income groups from 1990 to 2014 using VAR technique. The decomposition results of short-term drivers of carbon emission uncovered that the deterioration in energy efficiency (increase in energy intensity) was the main reason for the retaliatory rebound in carbon emissions post-2008 financial crisis, especially in high-income countries. The decomposition results of long-term drivers of carbon emission uncovered that trade openness contributed to reduce carbon emission in the world and the incomes groups in the long term, although trade openness led to increase in carbon emission in developing countries in the short term. To prevent retaliatory rebound of carbon emissions, what we should learn two lessons from the decomposition of carbon emission: improving energy efficiency, and expanding trade openness. Unfortunately, energy efficiency has been neglected in the economic recovery plans to respond to COVID-19 of various countries, especially developed countries, and worse, trade protectionism is on the rise, especially in developed countries. Therefore, we are pessimistic about preventing a retaliatory rebound in carbon emissions post-COVID-19 for now.