James Mak

UHERO Research Fellow and Emeritus Professor of Economics

Slot machines

Legalizing Casino Gaming to Fund Homes for Native Hawaiians

By James Mak Times are hard at the state legislature as lawmakers grapple with the fiscal crisis caused by the COVID-19 pandemic. Several bills to …

Vegetables at Foodland

Reviving Agriculture to Diversify Hawaii’s Economy

Hawaii state policymakers have identified agriculture as a sector capable of substantial expansion as part of the state’s efforts to diversify the economy. Agriculture has, …

Screenshot of tax credit for research activities form

The Hawaii Research Activity Tax Credit: Is It Effective and How Can It Be Improved?

In 2013, the Hawaii State Legislature enacted a tax credit for Hawaii technology firms engaged in qualified research activities satisfying requirements for the federal research …

Assessing the impact of COVID-19 on global fossil fuel consumption and CO2 emissions

Nori Tarui

Abstract

We assess the effect of the COVID-19 pandemic on global fossil fuel consumption and CO2 emissions over the two-year horizon 2020Q1-2021Q4. We apply a global vector autoregressive (GVAR) model, which captures complex spatial-temporal interdependencies across countries associated with the international propagation of economic impact due to the virus spread. The model makes use of a unique quarterly data set of coal, natural gas, and oil consumption, output, exchange rates and equity prices, including global fossil fuel prices for 32 major CO2 emitting countries in 1984-2019. We produce forecasts of coal, natural gas and oil consumption, conditional on GDP growth scenarios based on alternative IMF World Economic Outlook forecasts that were made before and after the outbreak. We also simulate the effect of a relative price change in fossil fuels, due to global scale carbon pricing, on consumption and output. Our results predict fossil fuel consumption and CO2 emissions to return to their pre-crisis levels, and even exceed them, within the two-year horizon despite the large reductions in the first quarter following the outbreak. Our forecasts anticipate more robust growth for emerging than for advanced economies. The model predicts recovery to the pre-crisis levels even if another wave of pandemic occurs within a year. Our counterfactual carbon pricing scenario indicates that an increase in coal prices is expected to have a smaller impact on GDP than on fossil fuel consumption. Thus, the COVID-19 pandemic would not provide countries with a strong reason to delay climate change mitigation efforts.