Market and Non-Market Valuation of Renewable Energy

This dissertation is an assessment of market and non-market valuation of renewable energy, specifically within the electricity sector. It contributes to the energy and economics literature through a battery of three chapters. This dissertation utilizes New Mexico as a case study, which is an economically poor and natural-resource rich state that produces and consumes electricity in the southwestern United States. It is also one of the four states that have adopted a policy for 100% clean energy by 2045. The first chapter models state- and county-level economic (e.g., employment, economic output, etc.) and environmental (e.g., externality, health impact, water use, greenhouse gases, etc.) impacts of the switch from fossil fuel generation to renewables on a state’s economy. This chapter provides a roadmap of how to measure the economic and environmental impacts of different energy scenarios by integrating various methodologies such as econometrics, GIS, and input-output into a unique system dynamics model. Findings from this chapter suggest that renewable energy intensive scenarios are only economically viable when market failure (externalities) is taken into account. Further, counties with varying energy potential and population density will experience variation in impacts. The following two chapters are based on a discrete choice experiment survey conducted in New Mexico in 2017. The second chapter estimates people’s willingness to pay (WTP) for renewable energy, particularly solar energy. Results suggest that respondents support an increased renewable portfolio standard solar requirement and they have a positive marginal WTP for rooftop solar and smart meter installation. These values are impacted by several factors, including location, environmental worldview, and proximity to solar. We observe a distance decay effect on respondents’ marginal WTP for different solar plans. As there are often questions concerning the validity of survey responses, the third chapter focuses on the impact of response under two alternative mechanisms: with and without having respondent sign an oath prior to taking a survey. Hypothesis testing results show no evidence that the oath lowers valuation measures in this setting. There are three major lessons from this dissertation. First, 100% clean energy policies are more desirable when internalizing external costs and hence correct for market failure. Second, consumers are willing to a pay a premium to accompany the move towards higher level of renewable energy diffusion. Third, an oath script may have limited application outside of the experimental lab and is not effective under every condition. This research will provide improved information to enact sustainable energy policies that are effective for the economy, environment, and individual consumers

Exploring non-linear causal nexus between economic growth and energy consumption across various R&D regimes: cross-country evidence from a PSTR model

Purpose: This study endeavors to elucidate the divergent conclusions encountered in empirical research regarding the interplay of Economic Growth (EG) and Energy Consumption (EC). Design/methodology/approach: For this purpose, we employ the Panel Smooth Threshold Regression (PSTR) model to intricately examine the non-linear impacts of independent variables on EC and EG within a dataset encompassing 46 countries over the period from 1996 to 2021. Findings: The outcomes of our investigation can be summarized as follows: First, the findings underscore the positive impact of the logarithm of net capital formation on EG. This impact is particularly pronounced at low levels of Research and Development (R&D), gradually waning beyond a certain threshold. Second, the ratio of capital to labor exhibits a negative influence on EC at lower R&D levels. Notably, these detrimental impacts become more pronounced as R&D levels increase. Third, trade openness contributes positively to EG, particularly evident at low R&D levels. However, with increasing R&D levels, the incremental benefits from trade diminish. Finally, our findings lend support to the feedback hypothesis. Nevertheless, the impact of R&D expenditures in countries moderates these positive effects. Practical implications: Policymakers should strategically balance resource allocation between capital formation and research endeavors, considering diminishing returns at elevated levels of R&D spending, to ensure sustained EG

Assessing the Economic and Environmental Impacts of Alternative Renewable Portfolio Standards: Winners and Losers

State-mandated renewable portfolio standards affect substantial portions of the total U.S. electricity supply. Renewable portfolio standards are environmentally motivated policies, yet they have the potential to greatly impact economy. There is not an agreement in the literature on the impact of renewable portfolio standards policies on regional economies, especially on job creation. By integrating various methodologies including econometrics, geographic information system, and input–output analysis into a unique system dynamics model, this paper estimates the economic and environmental impacts of various renewable portfolio standards scenarios in the state of New Mexico, located in Southwestern U.S. The state is endowed with traditional fossil fuel resources and substantial renewable energy potential. In this work we estimated and compared the economic and environmental tradeoffs at the county level under three renewable portfolio standards: New Mexico’s original standard of 20% renewables, the recently adopted 100% renewables standard, and a reduced renewable standard of 10%. The final one would be a return to a more traditional generation profile. We found that while the 20% standard has the highest market-based economic impact on the state as a whole, it is not significantly different from other scenarios. However, when environmental impacts are included, the 100% standard yields the highest value. In addition, while the state level economic impacts across the three scenarios are not significantly different, the county-level impacts are substantial. This is especially important for a state like New Mexico, which has a high reliance on energy for economic development. A higher renewable portfolio standard appears to be an economic tool to stimulate targeted areas’ economic growth. These results have policy implications

Assessing the impact of selected determinants on renewable energy sources in the electricity mix:The case of ASEAN countries

The electric sector is one of the main emitters of greenhouse gases that lead to exacerbating global warming. There is a lack of consensus in the literature regarding renewable energy (RE) determinants and their impacts on the power sector. Using a panel fully modified OLS model, we examine the effect of research and development, the human development index, technological innovation, and other factors on the share of RE sources in electricity generation in six Association of Southeast Asian Nations (ASEAN) member countries from 2000 to 2018. We find that research and development, the human development index, and technological innovation have different effects on different RE sources. The human development index and research and development, for example, modify the composition of RE by shifting resources from conventional RE sources such as hydropower to newer, more technology-intensive ones such as solar, wind, and bioenergy sources. Our findings show that technological innovation, captured by a number of patent filings, has nonsignificant effects on RE sources deployment. Population growth and energy consumption increase the adoption of more advanced RE sources, and higher levels of CO2 emissions are associated with more deployment of solar and wind technologies but less adoption of hydropower and geothermal energy. Our results provide fresh insights for policymakers enacting RE policies worldwide, especially in the ASEAN region

Insights from European nations on the spatial impacts of renewable energy sources on CO₂ emissions

Previous studies ignore the geospatial dynamics effects between renewable energy (RE) and CO2 while assessing such impacts in European countries. Further, most studies wrongfully use RE in its aggregated format rather than decomposing RE by its components. This is important as not all the RE sources share the same characteristics. We fill these gaps in the literature by investigating the effects of various forms of RE on CO2 emissions in 36 European countries from 2000 to 2018. Spatial econometric models have been used to better understand the results. A series of indicative tests confirmed the use of the Durbin panel model and the inclusion of spatial interaction of CO2 emissions in models. Our results confirm the Environmental Kuznets Curve hypothesis in our sample. We identify a positive and significant effect of economic growth (captured through GDP per capita), foreign direct investment, urbanization, and energy intensity on CO2 emissions. Our findings indicate that increasing well-established RE technologies such as geothermal and hydropower lower CO2 emissions. However, increasing RE sources with more advanced technologies such as solar, wind, and bioenergy either increase or have no impact on CO2 emissions. Increasing RE sources as a whole result in a reduction of CO2 emissions in our sample of countries. Moreover, our spatial models suggest that foreign direct investment lowers local CO2 emissions, while neighboring countries’ energy intensity and trade openness increase local CO2 emissions. Lastly, we find solar and bioenergy generation in adjacent countries increase local CO2 emissions, whilst geothermal generation in adjacent countries lowers local CO2 marginally

Role of Energy Mix in Determining Climate Change Vulnerability in G7 Countries

Anthropogenic activities are responsible for greenhouse gas emissions, causing extreme events like soil erosion, droughts, floods, forest fires and tornadoes. Fossil fuel consumption produces CO2, and trapping heat is the major reason for a rapid increase in global temperature, and electricity generation is responsible for 25% of greenhouse gas emissions. Fossil fuel consumption, CO2 emissions and their adverse impact have become the focus of efforts to mitigate climate change vulnerability. This study explores empirical determinants of vulnerability to climate change such as ecosystem, food, health and infrastructure. The sustainable use of energy is necessary for development, and a source of response to climate change. The present study focuses on renewable energy consumption to determine climate vulnerability in G7 countries between 1995 and 2019. The panel ARDL approach showed that the renewable to non-renewable energy mix showed a quadratic effect on vulnerability, whereby a minimum threshold of renewable energy is required to witness a reduction in food, health and infrastructure vulnerability. Other results indicate that trade openness and development expenditures reduce health vulnerability. Development expenditures also decrease ecosystem vulnerability, while trade openness increases it. However, both of these variables increase infrastructure vulnerability. Avoiding severe food and water crises requires investment to tackle climate change, conserve energy and water resources, reform global trade and food markets, and adapting and adopting climate-resilient responses to change

Effect of Islamic financial development on carbon emissions:A spatial econometric analysis

In this research, data from 36 countries from 2013 to 2018 were used to examine the factors influencing CO2 emissions in Islamic countries, focusing on the impact of Islamic financial growth. The spatial econometric technique estimation findings indicate that there is no geographical association between CO2 emissions in the analyzed countries. The test findings establish the existence of the Kuznets hypothesis for the environment. Additionally, trade openness and increased energy usage have resulted in an increase in CO2 emissions. The impacts of traditional financial development factors, such as financial market and financial institution variables, were examined in this research. The findings indicate that the two variables have no direct and substantial influence on CO2 emissions and that their significant effect on CO2 emissions appears only when their nonlinear and spillover effects on energy consumption and economic growth are included. Additionally, the growth of financial institutions is inversely proportional to the intensity of carbon emissions. The results indicate that while the development of financial markets and institutions results in a significant increase in CO2 emissions, the negative coefficient of the interaction between financial development and energy consumption indicates that financial development ensures energy efficiency, which reduces the intensity of carbon emissions. The findings indicate that the expansion and depth of Islamic finance, as measured by total assets, asset quality, earnings, and efficiency of Islamic banks, can result in a nonlinear increase in CO2 emissions with a U-shaped relationship. The study of spillover effects demonstrates that in addition to their direct and positive effects on CO2 emissions, the increase in Islamic social responsibility and consumer education, and awareness about Islamic banking reduce the enhancing effects of energy consumption on greenhouse gas emissions