COVID-19 Pandemic and CO₂ Emission in the United States: A Sectoral Analysis

The relationship between COVID-19 pandemic and CO₂ emission is not unexpected given the “stay at home” implication of the various stringency measures. Thus, we broadly examine the contemporaneous and dynamic impacts of uncertainty due to pandemics and epidemics (UPE) on US sectoral CO₂ emissions. The study relies on a new measure of UPE whose impact on CO₂ emission is traced using the structural vector autoregressive (SVAR) approach over the period of January 1985 to June 2020. The results from the SVAR contemporaneous effect reveal that sectoral CO₂ emission of the United States does not respond significantly to UPE but responds significantly to industrial productivity shock. This suggests that changes in sectoral CO₂ emission during pandemics are indirectly influenced by the unanticipated changes in industrial productivity due to pandemics. The contemporaneous effect of the residential sector CO₂ emission is larger than that of any other sector, suggesting the swift response of the former to COVID-19 pandemic relative to the latter category. The results of the dynamic responses via impulse response function show that CO₂ emission of the industrial and residential sectors reduces at a slower rate compared to any other sector. This is consistent for both the direct and indirect pandemic transmission channels.