The Transition to Renewables: Dampening the Impact of Fossil Fuel Price Shocks on Local Inflation

Magdalena Cornejo, Michelle Hallack and Matias David
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Michelle Hallack: Florence School of Regulation
Matias David: Inter-American Development Bank

No 345, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: This paper investigates the role of renewable energy adoption in mitigating the impact of international fossil fuel shocks on local inflation. We focus on LatinAmerica and the Caribbean (LAC), a region that has the highest share of renewables in its electricity matrix, but with significant heterogeneities across countriesand over time. Our findings reveal that the renewable adoption on electricity generation has had a dampening effect of international fossil fuel price shockson local inflation. The findings underscore the positive externality of renewable energy investment and its potential to enhance economic stability. Results arerobust to different speeds of renewables adoption and matrix composition.

Keywords: Energy transition; Crude oil; Gas; Inflation; LAC (search for similar items in EconPapers)
JEL-codes: E31 Q42 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2024-11
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:345

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