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Clean Growth

Author

Listed:
  • Costas Arkolakis
  • Conor Walsh

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.

Suggested Citation

  • Costas Arkolakis & Conor Walsh, 2023. "Clean Growth," NBER Working Papers 31615, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31615
    Note: EEE EFG ITI
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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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