Panorama – Countries that invest in renewable energy benefit from stronger economic growth and lower income inequalities

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Renewable energy acts as a catalyst to reduce income inequality and energy poverty within a country according to the study’s authors, which analyzed data from more than 200 countries between 2000-2019.

According to the study, countries where the use of renewable energy accounts for almost half (47%) of total energy consumption will see income inequalities decrease by 0.2% for each additional 1% increase in energy consumption. renewable energy consumption.

The results of the study, which will be published in the August 2021 edition of Energy Economics, indicate that economic growth discourages the use of polluting sources of energy consumption.

Research also indicates that a country’s economic growth must reach a threshold before it begins to spur an increase in renewable energy use and a decrease in fossil fuel consumption – on average, it was around 17. $ 000 per capita. For every $ 1,000 increase in per capita income beyond this threshold, the authors found that renewable energy use would increase by 1%.

The authors of the study suggest that policymakers around the world should recognize opportunities to promote renewable energy as an engine of equal and balanced growth and offer incentives, such as tax credits, carbon taxes. and markets for renewable energy certificates, to increase renewable energy production.

“The positive relationship between economic growth and renewable energy is endogenous,” said Dr Panagiotis Tzouvanas, senior lecturer in finance at the University of Sussex Business School. “The more you invest in renewable energy, the higher the economic growth. In turn, the higher the economic growth, the higher the consumption of renewable energy. The challenge is to achieve a level of economic development sufficient to initiate this win-win cycle.

Michail Filippidis, lecturer at Portsmouth Business School, added that the main implications of the study highlight renewable energy as a catalyst for reducing income inequality and energy poverty in a country.

“It should be emphasized that renewable energies, although they are clearly an important factor in reducing energy poverty, are not as efficient during the early stages of growth,” said Mr. Filippidis. “In this regard, our results suggest that companies with higher income levels, which have likely also achieved higher levels of environmental education and awareness, benefit more from renewable energy applications. “

The study authors focused their research on the Energy-Environment Kuznets Curve (EEKC) hypothesis which suggests that energy consumption increases with per capita income in the early stages of economic growth and then reaches a peak for a specific income threshold, before starting to decline. in the later stages of economic growth.

The study found that at the start of a country’s economic expansion, the consumption and production of renewable energy declined as the economy grew, while income inequality also increased at the start when the economy grew. renewable energy consumption began to increase.

The authors explain that, as the cost of installing renewable energy systems is passed on to consumers through electricity bills, this decreases the incentive to use renewable electricity. But then economic growth helps promote renewable technologies leading to higher renewable electricity production over time and hence lower costs for income groups.

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University of Sussex

University of Portsmouth



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