Economic benefits from the transition to a lower carbon economy

Shanti Gamper-Rabindran, Associate Professor, Graduate School of Public and International Affairs, and Dept of Economics, University of Pittsburgh

Several European Union countries have embarked on a program to transition to a lower carbon economy, by increasing the share of renewable energy (RE) in their power sector and by increasing energy efficiency. In 2014, Denmark, Portugal and Germany produced 51%, 32% and 21% of their electricity from RE, respectively [1]. China's 12th Energy Plan aims to achieve 11.4% of energy generation from non-fossil sources (hydro, nuclear and renewables) by 2015 [2]. Globally, China ranks 1st in total new RE installation capacity [3].

Onshore wind power has become a more cost competitive alternative to fossil and nuclear for electricity generation. The Energy Information Administration's average levelized costs of new installation in 2015 demonstrate that onshore wind is cheaper than coal, gas, nuclear [4] Onshore wind is even more competitive after accounting for the costs of GHG emissions and subsidies for energy resources [4]. Wind and solar provide other co-benefits: (i) they are more resilient sources of energy under climate change induced water scarcity, as they use little water in electricity generation, in contrast to coal, natural gas, and nuclear power which use large amounts of water for cooling; and (ii) power generation from wind and solar emit no air pollutants, in contrast to coal, thus yielding public health benefits [5].

Greater public and private R&D into RE technologies and support technologies such as batteries and smart grid can further lower the costs of RE and address the issue of intermittency. Countries that have invested into R&D on renewables have benefitted by becoming the leading players in this industry, both in terms of patent counts and market share. While Europe and the US continue to dominate in terms of cumulative patents in the renewable sector, China with its growing installation and exports, is also catching up on the innovation yardstick [6]. In 2014, the US ranked 1st , EU-28 ranked 2nd and China ranked 3rd in venture capital for clean technology firms [1]. In a carbon constrained world, competitive advantage in the renewable energy sector can yield profitable returns with increasing demand for improved local air quality and reduced global GHG emissions.


[1] Next 10. Green Innovation Index 2015
[2] Joanna Lewis, Energy and Climate Goals of China's 12th Five-Year Plan, Centre for Climate and Energy Solutions, March 2011
[3] Renewable Energy: Global Status Report 2015
[4] Energy Information Administration (EIA). 2011b. Levelized cost of new generation resources inthe annual energy outlook 2011. Washington, DC: Department of Energy
[5] Union of Concerned Scientists, Benefits of Renewable Energy Use, viewed 2015
[6] Joanna Lewis 2013 Green Innovation in China: China's Wind Power Industry and the Global Transition to a Low-Carbon Economy, Columbia University Press 2013