Clean Growth

Costas Arkolakis and Conor Walsh

No 31615, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide a spatial theory of clean growth to assess the global impact of the rise of renewable energy. We model the details of the combined production and transmission network of electricity (“the grid”) that determine the supply and losses of energy in space. The local rate of clean energy adoption depends on learning-by-doing, the global electricity and trade network, and regional comparative advantage in renewable resources. We use the model to measure the aggregate and spatial implications of clean growth. We find that the world’s power system is likely to be dominated by renewables by 2040 in a range of scenarios, with substantial welfare gains, even in the absence of policy. Incorporating policy, we find that the US Inflation Reduction Act significantly accelerates renewable uptake, and generates substantial economic benefits. In addition, planned grid improvements lower prices substantially in many areas of the US, justifying their cost of construction.

JEL-codes: F11 Q40 Q41 Q42 Q43 R13 (search for similar items in EconPapers)
Date: 2023-08
New Economics Papers: this item is included in nep-ene, nep-env, nep-geo and nep-tid
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