Countries that invest in renewables enjoy higher economic growth and lower income inequalities

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Countries that invest more in renewable energy enjoy greater economic growth and lower income inequality, a new study by academics at the University of Sussex Business School and the University of Portsmouth has found.

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 inequality 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 saving, 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, averaging 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.

Dr. Panagiotis Tzouvanas, Senior Lecturer in Finance at the University of Sussex Business School, said: “The positive relationship between economic growth and renewable energy is endogenous. The more you invest in renewable energy, the higher the economic growth. economic growth, the consumption of more renewable energies. The challenge is to achieve a level of economic development sufficient to initiate this win-win cycle.

Michail Filippidis, Lecturer at Portsmouth Business School, said: “The main implications of our study highlight renewable energy as a catalyst for reducing income inequality and energy poverty in a country. Renewable energy should be highlighted, although this is clearly an important factor. towards reducing fuel poverty, is not as effective during the early stages of growth. In this regard, our results suggest that societies with higher income levels, which have likely also achieved higher levels of education and environmental awareness, benefit more from the applications of renewable energies. “

Dr Ioannis Chatziantoniou, Visiting Fellow in Economics and Finance at the University of Portsmouth, said: “The prevailing view is that increased consumption and economic growth lead to environmental degradation. What our research indicates is that the reality is more complicated. level of their environmental culture and learning what to consume, how to consume and where to invest their income, economic growth can potentially be used as an essential tool in the fight against climate change.

The authors of the study 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 the cost of installing renewable energy systems is passed on to consumers through electricity bills, which decreases the incentive to consume 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.

Dr Tzouvanas said: “The link between economic growth and the production and consumption of renewable energy is strongest in developed countries. High-income countries are characterized by political stability, well-developed financial markets and financial institutions, openness to trade, and access to quality education, all of which generate resources for government subsidies or technological innovations for advancing renewable energy systems. For developing countries, the benefits of growing a renewable energy system will not be felt immediately. ”

Renewable energies to come in 2020: report

More information:
Michail Filippidis et al, Energy poverty through the prism of the energy-environment Kuznets curve hypothesis, Energy saving (2021). DOI: 10.1016 / j.eneco.2021.105328

Provided by the University of Sussex

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