The spread of the Covid-19 pandemic is brought under control during the course of 2021 in the Stated Policies Scenario (STEPS) and the Sustainable Development Scenario (SDS), and the subsequent economic recovery means that the global economy is only 5% smaller by 2025 than it would have been under a precrisis trajectory. There is however a risk that these assumptions are too optimistic. In the Delayed Recovery Scenario (DRS), we explore what might happen if this turns out to be the case.

In the DRS, more prolonged outbreaks of Covid-19 prompt continued periodic confinements and other restrictive measures by governments. In addition to a deeper near-term recession, the long-term growth potential of the global economy is significantly impaired as high unemployment erodes human capital and as bankruptcies and structural economic changes render some physical capital unproductive. There are lasting changes in consumer behaviour and company strategies. By 2030, the global economy is nearly 10% smaller than in the STEPS.

This scenario puts many aspects of global energy into slow motion, holding back energy demand and CO₂ emissions compared with the STEPS but also slowing many of the structural changes in the energy sector that are essential for clean energy transitions. There is systematic underinvestment in new, cleaner energy technologies and over reliance on existing capital stock. Inequalities in the global economy and in the energy sector worsen, and recent progress towards universal access to energy is slowed or goes into reverse as the incomes of the poorest are hit and funding for access programmes is squeezed.

Oil demand growth slows to a crawl in the DRS and does not exceed 2019 levels until the latter part of the 2020s, after which global consumption plateaus at just under 100 mb/d. Road freight, shipping and aviation are all heavily affected by the economic slowdown and by changes in behaviour, although oil use in cars is buttressed somewhat by a slower turnover in the car fleet and, in the near term, by a Covid-19-induced preference for travelling by car rather than by public transport.

Lower oil demand and prices in the DRS increase the economic and social pressures on major oil and gas producing countries, while also limiting their scope for meaningful economic diversification and integration into global value chains. Unsuccessful efforts to reduce reliance on hydrocarbon revenue would compound the risks facing these producer economies and the global markets that they supply.

Electricity demand in the DRS is down by 6% compared with the STEPS, and renewables take a slightly higher share of generation. The pace of growth in wind and solar capacity is relatively robust in the power sector, but – as in the STEPS – renewables face a much tougher outlook in hard-to-abate sectors such as long-distance transport and industry.

There are warning signs for energy transitions and for electricity security in the disparity between growing investment needs for grids, in part to accommodate higher shares of wind and solar PV, and falling revenues for grid operators.

Coal consumption takes another hit in the DRS: after a 10% drop in 2020, coal-fired generation sees a further 8% fall to 2030; fewer new coal plants are built, more are retired and operating plants run fewer hours.

Natural gas demand is strongly affected by the weaker outlook for power and industry; this prolongs the current surplus in supply until the early 2030s and keeps regional prices subdued, placing significant strains on the balance sheets of export-oriented producers and new LNG projects.

Investments in fossil fuels over the period to 2030 are lower in the DRS by around 10%, but this is not compensated for by a reallocation of capital towards low-carbon technologies, which also experience a slowdown in investment activity.

CO₂ emissions are reduced compared with the STEPS and flatten below 2019 levels. However, this is far from sufficient to achieve climate objectives and comes at a huge social and economic cost. Based on the lower GDP levels in the DRS, this reduction in emissions costs nearly $6 000 for every tonne of CO₂ that is saved.