Share:


Estimating the real shock to the economy from COVID-19: The example of electricity use in China

    Lu Liu Affiliation
    ; Junbing Huang Affiliation
    ; Hong Li Affiliation

Abstract

Quantifying the shock to the economy from the COVID-19 pandemic is difficult. Although this shock is easily linked to financial markets as a sort of monetary shock, few studies have been done on its effect on the real economy. This study takes a particular economic perspective, focusing on electricity uses in various sectors of the economy. We propose a novel method for comparing electricity use in 2019Q1 and 2020Q1, based on which we derive the degree of the real shock to some important economic sectors from COVID-19. In our theoretical framework, demand for energy and its influencing factors are related to the total scale of the economy, i.e., the gross domestic product. Using suitable empirical methods, we obtain certain marginal effects and then calculate the corresponding ratio as the real shock from COVID-19. The ratio between these marginal effects reveals the need for a balance between stocks and the corresponding differences in the economy. In our cases, the electricity use in various economic sectors plays a role in both stocks and the differences. We find that, although manufacturing and consumption are affected, the services are more vulnerable to the shock from the COVID-19 pandemic. Our findings offer implications for policymakers.


First published online 09 June 2022

Keyword : electricity use, COVID-19, economic impact, shock to the real economy, Chinese cities

How to Cite
Liu, L., Huang, J., & Li, H. (2022). Estimating the real shock to the economy from COVID-19: The example of electricity use in China. Technological and Economic Development of Economy, 28(5), 1221–1241. https://doi.org/10.3846/tede.2022.17027
Published in Issue
Sep 12, 2022
Abstract Views
1175
PDF Downloads
645
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Abulibdeh, A. (2021). Modeling electricity consumption patterns during the COVID-19 pandemic across six socioeconomic sectors in the State of Qatar. Energy Strategy Reviews, 38, 100733. https://doi.org/10.1016/j.esr.2021.100733

Agdas, D., & Barooah, P. (2020). Impact of the COVID-19 pandemic on the US electricity demand and supply: An early view from data. IEEE Access, 8, 151523–151534. https://doi.org/10.1109/ACCESS.2020.3016912

Ahmad, M. A., Ammar, M. B., & Nawaf, F. A. (2022). Impact of COVID-19 interventions on electricity power production: An empirical investigation in Kuwait. Electric Power Systems Research, 205, 107718. https://doi.org/10.1016/j.epsr.2021.107718

Ai, H. S., Zhong, T. L., & Zhou, Z. Q. (2022). The real economic costs of COVID-19: Insights from electricity consumption data in Hunan Province, China. Energy Economics, 105, 105747. https://doi.org/10.1016/j.eneco.2021.105747

Armeanu, D. S., Gherghina, S. C., Andrei, J. V., & Joldes, C. C. (2022). Modeling the impact of the COVID-19 outbreak on environment, health sector and energy market. Sustainable Development, 1–30. https://doi.org/10.1002/sd.2299

Arora, V., & Lieskovsky, J. (2016). Electricity use as an indicator of U.S. economic activity (EconStor Research Reports). ZBW – Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft. http://hdl.handle.net/10419/126147

Aruga, K., Islam, M. M., & Jannat, A. (2020). Effects of COVID-19 on Indian energy consumption. Sustainability, 12(14), 5616. https://doi.org/10.3390/su12145616

Baranzini, A., Weber, S., & Bareit, M., & Mathys, N. A. (2013). The causal relationship between energy use and economic growth in Switzerland. Energy Economics, 36, 464–470. https://doi.org/10.1016/j.eneco.2012.09.015

Bompard, E., Botterud, A., Corgnati, S., Huang, T., Jafari, M., Leone, P., Mauro, S., Montesano, G., Papa, C., & Profumo, F. (2020). An electricity triangle for energy transition: Application to Italy. Applied Energy, 277, 115525. https://doi.org/10.1016/j.apenergy.2020.115525

Bompard, E., Mosca, C., Colella, P., Antonopoulos, G., Fulli, G., Masera, M., Poncela-Blanco, M., & Vitiello, S. (2020). The immediate impacts of COVID-19 on European electricity systems: a first assessment and lessons learned. Energies, 14(1), 96. https://doi.org/10.3390/en14010096

Bouznit, M., Pablo-Romero, M. P., & Sánchez-Braza, A. (2018). Residential electricity consumption and economic growth in Algeria. Energies, 11(7), 1–18. https://doi.org/10.3390/en11071656

Brounen, D., Kok, N., & Quigley, J. M. (2012). Residential energy use and conservation: Economics and demographics. European Economic Review, 56(5), 931–945. https://doi.org/10.1016/j.euroecorev.2012.02.007

Burleyson, C. D., Rahman, A., Rice, J. S., Smith, A. D., & Voisin, N. (2021). Multiscale effects masked the impact of the COVID-19 pandemic on electricity demand in the United States. Applied Energy, 304, 117711. https://doi.org/10.1016/j.apenergy.2021.117711

China Entrepreneur Investment Club. (CEIC). (2016). City-level electricity use data. https://www.ceicdata.com/zh-hans/

China National Bureau of Statistics. (2019). China City Statistical Yearbook 2018. http://www.stats.gov.cn/tjsj/tjcbw/201907/t20190708_1674721.html

Cicala, S. (2020). Powering work from home (NBER Working Paper No. 27397). http://www.nber.org/papers/w27937

Cui, W. C., Li, J. Y., Xu, W. T., & Güneralp, B. (2021). Industrial electricity consumption and economic growth: A spatio-temporal analysis across prefecture-level cities in China from 1999 to 2014. Energy, 222, 119932. https://doi.org/10.1016/j.energy.2021.119932

DingxiangYuan. (2020). The number of confirmed COVID-19 cases. http://www.dxy.cn

Ferguson, R., Wilkinson, W., & Hill, R. (2000). Electricity use and economic development. Energy Policy, 28(13), 923–934. https://doi.org/10.1016/S0301-4215(00)00081-1

Fernandes, N. (2020). Economic effects of coronavirus outbreak (COVID-19) on the World Economy (IESE Business School Working Paper No. WP-1240-E). SSRN. http://ssrn.com/abstract=3557504

García, S., Parejo, A., Personal, E., Guerrero, J. I., Biscarri, F., & León, C. (2021). A retrospective analysis of the impact of the COVID-19 restrictions on energy consumption at a disaggregated level. Applied Energy, 287, 116547. https://doi.org/10.1016/j.apenergy.2021.116547

Gu, X., Ying, S., Zhang, W. Q., & Tao, Y. (2020). How do firms respond to COVID-19? First evidence from Suzhou, China. Emerging Markets Finance and Trade, 56(10), 2181–2197. https://doi.org/10.1080/1540496X.2020.1789455

Guo, F., Huang, Y. P., Wang, J. Y., & Wang, X. (2022). The informal economy at times of COVID-19 pandemic. China Economic Review, 71, 101722. https://doi.org/10.1016/j.chieco.2021.101722

Hasan, S., & Mozumder, P. (2017). Income and energy use in Bangladesh: A household level analysis. Energy Economics, 65, 115–126. https://doi.org/10.1016/j.eneco.2017.05.006

Helm, D. (2020). The environmental impacts of the coronavirus. Environmental and Resource Economics, 76, 21–38. https://doi.org/10.1007/s10640-020-00426-z

Hu, X. H., & Lin, X. (2013). A study of the relationship between electricity consumption and GDP growth in the Hainan International Tourism Island of China. Research in World Economy, 4(1), 109–115. https://doi.org/10.5430/rwe.v4n1p109

Huang, C. L., Wang, Y. M., Li, X. W., Ren, L., Zhao, J., Hu, Y., Zhang, L., Fan, G., Xu, J., Gu, X., Cheng, Z., Yu, T., Xia, J., Wei, Y., Wu, W., Xie, X., Yin, W., Li, H., & Cao, B.(2020). Clinical features of patients infected with 2019 novel coronavirus in Wuhan, China. The Lancet, 395, 497–506. https://doi.org/10.1016/S0140-6736(20)30183-5

International Monetary Fund. (2020). World economic outlook, April 2020: The great lockdown. World Economic Outlook reports. https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020/

Janzen, B., & Radulescu, D. (2020). Electricity use as a real time indicator of the economic burden of the COVID-19-related lockdown: Evidence from Switzerland. CESifo Economic Studies, 66(4), 303–321. https://doi.org/10.1093/cesifo/ifaa010

Jia, Z., Wen, S., & Lin, B. (2021). The effects and reacts of COVID-19 pandemic and international oil price on energy, economy, and environment in China. Applied Energy, 302, 117612. https://doi.org/10.1016/j.apenergy.2021.117612

Khalil, M. A., & Fatmi, M. R. (2022). How residential energy consumption has changed due to COVID-19 pandemic? An agent-based model. Sustainable Cities and Society, 81, 103832. https://doi.org/10.1016/j.scs.2022.103832

Krarti, M., & Aldubyan, M. (2021). Review analysis of COVID-19 impact on electricity demand for residential buildings. Renewable and Sustainable Energy Reviews, 143, 110888. https://doi.org/10.1016/j.rser.2021.110888

Ku, L., Qiu, Y., Lou, J., Nock, D., & Xing, B. (2022). Changes in hourly electricity consumption under COVID mandates: A glance to future hourly residential power consumption pattern with remote work in Arizona. Applied Energy, 310, 118539. https://doi.org/10.1016/j.apenergy.2022.118539

Laing, T. (2020). The economic impact of the coronavirus 2019 (COVID-19): Implications for the mining industry. The Extractive Industries and Society, 7(2), 580–582. https://doi.org/10.1016/j.exis.2020.04.003

Land, M. J., Thürer, M., Stevenson, M., Fredendall, L. D., & Scholten, K. (2021). Inventory diagnosis for flow improvement – A design science approach. Journal of Operations Management, 67(5), 560–587. https://doi.org/10.1002/joom.1133

Lawal, A. I., Ozturk, I., Olanipekun, I. O., & Asaleye, A. J. (2020). Examining the linkages between electricity consumption and economic growth in African economies. Energy, 208, 118363. https://doi.org/10.1016/j.energy.2020.118363

Liang, S., Leng, H., Yuan, Q., & Yuan, C. (2021). Impact of the COVID-19 pandemic: Insights from vacation rentals in twelve mega cities. Sustainable Cities and Society, 74, 103121. https://doi.org/10.1016/j.scs.2021.103121

Liu, L. (2020). Emerging study on the transmission of the novel coronavirus (COVID-19) from urban perspective: Evidence from China. Cities, 103, 102759. https://doi.org/10.1016/j.cities.2020.102759

Maas, S. (2020). Working from home’s impact on electricity use in the pandemic. The Digest: No. 12, December 2020. NBER. https://www.nber.org/digest-202012/working-homes-impact-electricity-use-pandemic

Massa, R., & Rosellón, J. (2020). Linear and nonlinear Granger causality between electricity production and economic performance in Mexico. Energy Policy, 142, 111476. https://doi.org/10.1016/j.enpol.2020.111476

Mongaji, E. (2020). Impact of COVID-19 on transportation in Lagos, Nigeria. Transportation Research Interdisciplinary Perspectives, 6, 100154. https://doi.org/10.1016/j.trip.2020.100154

Morrice, D. J., Cronin, P., Tanrisever, F., & Butler, J. C. (2016). Supporting hurricane inventory management decisions with consumer demand estimates. Journal of Operations Management, 45(1), 86–100. https://doi.org/10.1016/j.jom.2016.05.006

Muhammad, S., Long, X. L., & Salman, M. (2020). COVID-19 pandemic and environmental pollution: A blessing in disguise? Science of the Total Environment, 728, 138820. https://doi.org/10.1016/j.scitotenv.2020.138820

Narayan, P. K., & Singh, B. (2007). The electricity consumption and GDP nexus for the Fiji Islands. Energy Economics, 29(6), 1141–1150. https://doi.org/10.1016/j.eneco.2006.05.018

National Bureau of Statistics in China. (n.d.). GDP in the first quarters of 2019 and 2020. http://www.stats.gov.cn

Norouzi, N., Rubens, G. Z., Choupanpiesheh, S., & Enevoldsen, P. (2020). When pandemics impact economies and climate change: Exploring the impacts of COVID-19 on oil and electricity demand in China. Energy Research & Social Science, 68, 101654. https://doi.org/10.1016/j.erss.2020.101654

Polaris power grid. (n.d.). Data on electricity use. http://shoudian.bjx.com.cn

Qian, Y., & Fan, W. (2020). Who loses income during the COVID-19 outbreak? Evidence from China. Research in Social Stratification and Mobility, 68, 100522. https://doi.org/10.1016/j.rssm.2020.100522

Ouédraogo, I. M. (2010). Electricity consumption and economic growth in Burkina Faso: A cointegration analysis. Energy Economics, 32(3), 524–531. https://doi.org/10.1016/j.eneco.2009.08.011

Quéré, C. L., Jackson, R. B., Jones, M. W., Smith, A. J. P., Abernethy, S., Andrew, R. M., De-Gol, A. J., Willis, D. R., Shan, Y., Canadell, J. G., Friedlingstein, P., Creutzig, F., & Peters, G. P. (2020). Temporary reduction in daily global CO2 emissions during the COVID-19 forced confinement. Natural Climate Change, 10, 647–653. https://doi.org/10.1038/s41558-020-0797-x

Qureshi, F. (2021). COVID-19 pandemic, economic indicators and sectoral returns: Evidence from US and China. Economic Research-Ekonomska Istraživanja, 1–31. https://doi.org/10.1080/1331677X.2021.1934508

Ruan, G. C., Wu, J. H., Zhong, H. W., Xia, Q., & Xie, L. (2021). Quantitative assessment of U.S. bulk power systems and market operations during the COVID-19 pandemic. Applied Energy, 286, 116354. https://doi.org/10.1016/j.apenergy.2020.116354

Rugani, B., & Caro, D. (2020). Impact of COVID-19 outbreak measures of lockdown on the Italian carbon footprint. Science of the Total Environment, 737, 139806. https://doi.org/10.1016/j.scitotenv.2020.139806

Saadat, S., Rawtani, D., & Hussain, C. M. (2020). Environmental perspective of COVID-19. Science of the Total Environment, 728, 138870. https://doi.org/10.1016/j.scitotenv.2020.138870

Shahbaz, M., Sarwar, S., Chen, W., & Malik, M. N. (2017). Dynamics of electricity consumption, oil price and economic growth: Global perspective. Energy Policy, 108, 256–270. https://doi.org/10.1016/j.enpol.2017.06.006

Shi, Y., Ren, X. Y., Guo, K., Zhou, Y., & Wang, J. (2020). Research on the economic development pattern of Chinese counties based on electricity consumption. Energy Policy, 147, 111881. https://doi.org/10.1016/j.enpol.2020.111881

Sigala, M. (2020). Tourism and COVID-19: Impacts and implications for advancing and resetting industry and research. Journal of Business Research, 117, 312–321. https://doi.org/10.1016/j.jbusres.2020.06.015

Singh, K., & Vashishtha, S. (2020). A re-examination of the relationship between electricity consumption and economic growth in India. Energy Economics Letters, 7(1), 36–45. https://doi.org/10.18488/journal.82.2020.71.36.45

Sodhi, M. S. (2016). Natural disasters, the economy and population vulnerability as a vicious cycle with exogenous hazards. Journal of Operations Management, 45(1), 101–113. https://doi.org/10.1016/j.jom.2016.05.010

Srivastava, S. K. (2016). Causal relationship between electricity consumption and GDP: Plausible explanation on previously found inconsistent conclusions for India. Theoretical Economics Letters, 6(2), 276–281. https://doi.org/10.4236/tel.2016.62031

Tang, X., Li, Z. X., Hu, X., Xu, Z., & Peng, L. (2021). Self-correcting error-based prediction model for the COVID-19 pandemic and analysis of economic impacts. Sustainable Cities and Society, 74, 103219. https://doi.org/10.1016/j.scs.2021.103219

Tiwari, A. K., Eapen, L. M., & Nair, S. R. (2021). Electricity consumption and economic growth at the state and sectoral level in India: Evidence using heterogeneous panel data methods. Energy Economics, 94, 105064. https://doi.org/10.1016/j.eneco.2020.105064

Tosepu, R., Gunawan, J., Effendy, S. D., Imran Ahmad, La O. A., Lestari, H., Bahar, H., & Asfian, P. (2020). Correlation between weather and Covid-19 pandemic in Jakarta, Indonesia. Science of the Total Environment, 725, 138436. https://doi.org/10.1016/j.scitotenv.2020.138436

Vos, J. D. (2020). The effect of COVID-19 and subsequent social distancing on travel behavior. Transportation Research Interdisciplinary Perspectives, 5, 100121. https://doi.org/10.1016/j.trip.2020.100121

Wang, Q., & Han, X. Y. (2021). Spillover effects of the United States economic slowdown induced by COVID-19 pandemic on energy, economy, and environment in other countries. Environmental Research, 196, 110936. https://doi.org/10.1016/j.envres.2021.110936

Wang, Q., & Liu, L. (2022). Pandemic or panic? A firm level study on the psychological and industrial impacts of COVID 19 on the Chinese stock market. Financial Innovation, 8, 36. https://doi.org/10.1186/s40854-022-00335-8

Wang, Q., & Su, M. (2020). A preliminary assessment of the impact of COVID-19 on environment – A case study of China. Science of the Total Environment, 728, 138915. https://doi.org/10.1016/j.scitotenv.2020.138915

Wang, Q., Li, S. Y., & Jiang, F. (2021). Uncovering the impact of the COVID-19 pandemic on energy consumption: New insight from difference between pandemic-free scenario and actual electricity consumption in China. Journal of Cleaner Production, 313, 127897. https://doi.org/10.1016/j.jclepro.2021.127897

Werth, A., Gravino, P., & Prevedello, G. (2021). Impact analysis of COVID-19 responses on energy grid dynamics in Europe. Applied Energy, 281, 116045. https://doi.org/10.1016/j.apenergy.2020.116045

Wu, C. F., Wang, C. M., Chang, T., & Yuan, C.-C. (2019). The nexus of electricity and economic growth in major economies: The United States-India-China triangle. Energy, 188, 116006. https://doi.org/10.1016/j.energy.2019.116006

Xu, Z., Shi, L., Wang, Y. J., Zhang, J., Huang, L., Zhang, C., Liu, S., Zhao, P., Liu, H., Zhu, L., Tai, Y., Bai, C., Gao, T., Song, J., Xia, P., Dong, J., Zhao, J., & Wang, F.-S. (2020). Pathological findings of COVID-19 associated with acute respiratory distress syndrome. Lancet Respiratory Medicine, 8(4), 420–422. https://doi.org/10.1016/S2213-2600(20)30076-X

Zambrano-Monserrate, M. A., Ruano, M. A., & Sanchez-Alcalde, L. (2020). Indirect effects of COVID-19 on the environment. Science of the Total Environment, 728, 138813. https://doi.org/10.1016/j.scitotenv.2020.138813

Zhang, L. Y., Li, H., Lee, W. J., & Liao, H. (2021). COVID-19 and energy: Influence mechanisms and research methodologies. Sustainable Production and Consumption, 27, 2134–2152. https://doi.org/10.1016/j.spc.2021.05.010

Zhang, P. F., Cai, W. Q., & Yao, M. T., Wang, Z., Yang, L., & Wei, W. (2020). Urban carbon emissions associated with electricity consumption in Beijing and the driving factors. Applied Energy, 275, 115425. https://doi.org/10.1016/j.apenergy.2020.115425

Zhou, P., Yang, X. L., Wang, X. G., Hu, B., Zhang, L., Zhang, W., Si, H.-R., Zhu, Y., Li, B., Huang, C.-L., Chen, H.-D., Chen, J., Luo, Y., Guo, H., Jiang, R.-D., Liu, M.-Q., Chen, Y., Shen, X.-R., Wang, X., Zheng, X.-S., Zhao, K., Chen, Q.-J., Deng, F., Liu, L.-L., Yan, B., Zhan, F.-X., Wang, Y.-Y., Xiao, G.-F., & Shi, Z.-L. (2020). A pneumonia outbreak associated with a new coronavirus of probable bat origin. Nature, 579, 270–273. https://doi.org/10.1038/s41586-020-2012-7

Zinecker, M., Doubravsky, K., Balcerzak, A. P., Pietrzak, M. B., & Dohnal, M. (2021). The COVID-19 disease and policy response to mitigate the economic impact the EU. Technological and Economic Development of Economy, 27(3), 742–762. https://doi.org/10.3846/tede.2021.14585