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Renewable resource rents, taxation and the effects of wind power on rural economies

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  • Hillberry, Russell
  • Nguyen, Nhu

Abstract

The rapid growth of utility-scale wind energy generation is a potentially important boon to rural economies in the United States. Yet econometric estimates suggest that the local economic benefits of wind energy generation have been modest, perhaps because the sector is capital-intensive and financed almost exclusively by external capital. In this paper we argue that a) both the presence of a critical - but unpaid - factor of production (the wind) and generous federal subsidies are quantitatively important sources of economic rent, and b) a large portion of these rents accrue to providers of capital who reside outside the local economy. We build a partial equilibrium model that illustrates the mechanisms that generate economic rent, and integrate it into a small open economy general equilibrium model of a county’s economy. We calibrate the partial and general equilibrium models to data from two rural counties in Indiana, quantify the economic rents, and consider the consequences of a resource rent tax. Resource rent taxes generate significantly larger economic benefits for communities that host wind power, and offer an opportunity to spread the sector’s economic benefits more broadly within them. Broadly distributed revenues from resource rent taxes might facilitate greater acceptance of utility scale wind power in communities where the sector would otherwise be unwelcome. State public utility commissions provide an analytical infrastructure that could support local taxation of the kind that we consider.

Suggested Citation

  • Hillberry, Russell & Nguyen, Nhu, 2022. "Renewable resource rents, taxation and the effects of wind power on rural economies," Conference papers 333477, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
  • Handle: RePEc:ags:pugtwp:333477
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    References listed on IDEAS

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    6. Dakshina G. De Silva & Robert P. McComb & Anita R. Schiller, 2016. "What Blows in with the Wind?," Southern Economic Journal, Southern Economic Association, vol. 82(3), pages 826-858, January.
    7. David Popp & Francesco Vona & Giovanni Marin & Ziqiao Chen, 2020. "The Employment Impact of Green Fiscal Push: Evidence from the American Recovery Act," SciencePo Working papers Main hal-03403066, HAL.
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    9. Brown, Jason P. & Pender, John & Wiser, Ryan & Lantz, Eric & Hoen, Ben, 2012. "Ex post analysis of economic impacts from wind power development in U.S. counties," Energy Economics, Elsevier, vol. 34(6), pages 1743-1754.
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    Keywords

    Land Economics/Use; Agricultural and Food Policy;

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