Economic crises as critical junctures for policy and structural changes towards decarbonization - the cases of Spain and Germany

Crises may act as tipping points for decarbonization pathways by triggering structural economic change or offering windows of opportunity for policy change. We investigate both types of effects of the global financial and COVID-19 crises on decarbonization in Spain and Germany through a quantitative Kaya-decomposition analysis of CO2 emissions and through a qualitative review of climate and energy policy changes. We show that the global financial crisis resulted in a critical juncture for Spanish CO2 emissions due to the combined effects of the deep economic recession and crisis-induced structural change, resulting in reductions in carbon and energy intensities and shifts in the economic structure. However, the crisis also resulted in a rollback of renewable energy policy, halting progress in the transition to green electricity. The impacts were less pronounced in Germany, where pre-existing decarbonization and policy trends continued after the crisis. Recovery packages had modest effects, primarily due to their temporary nature and the limited share of climate-related spending. The direct short-term impacts of the COVID-19 crisis on CO2 emissions were more substantial in Spain than in Germany. The policy responses in both countries sought to align short-term economic recovery with the long-term climate change goals of decarbonization, but it is too soon to observe their lasting effects. Our findings show that crises can affect structural change and support decarbonization but suggest that such effects depend on pre-existing trends, the severity of the crisis and political manoeuvring during the crisis. The short-term effects of the Global Financial and COVID-19 crises on CO2 emission drivers were larger in Spain than in Germany because of pre-existing trends and the crises ' magnitudeThe Global Financial Crisis represented a tipping point for emissions in Spain, affecting the structural drivers of emissions. However, renewable energy policy was temporarily negatively affected by the crisis.Both countries' policy responses to the COVID-19 crisis sought to align short-term economic recovery with long-term decarbonization goals, moving beyond the 'environment vs economic recovery' dichotomy that prevailed during the Global Financial Crisis.Green recovery packages should prioritize measures with a higher potential to support structural change consistent with deep decarbonization.It is crucial to adapt energy and climate policy ex-ante to make them more resilient to political and fiscal pressures which may emerge in the wake of crises.