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The Economic Impacts of Clean Power

Author

Listed:
  • Costas Arkolakis
  • Conor Walsh

Abstract

In this paper we assess the economic impacts of moving to a renewable-dominated grid in the US. We use projections of capital costs to develop price bounds on future wholesale power prices at the local geographic level. We then use a class of spatial general equilibrium models to estimate the effect on wages and output of prices falling below these bounds in the medium term. Power prices fall anywhere between 20% and 80%, depending on local solar resources, leading to an aggregate real wage gain of 2-3%. Over the longer term, we show how moving to clean power represents a qualitative change in the aggregate growth process, alleviating the “resource drag” that has slowed recent productivity growth in the US.

Suggested Citation

  • Costas Arkolakis & Conor Walsh, 2024. "The Economic Impacts of Clean Power," NBER Working Papers 33028, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33028
    Note: EEE EFG ITI
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    More about this item

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • 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
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • 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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