Abstract
ABSTRACT This paper aims to measure the impact of the gradual adoption of Renewable Energy Sources (RES) on the welfare of consumers. To this end, we construct a theoretically founded measure of the true cost of living (TCL) and the equivalence scale (ES) for the household sector, based on a weather database of heating and cooling degree days. We estimate those values for 64 countries, which represent over two-thirds of the world population, according to World Bank statistics. We assume that the identified household in each country minimizes its expenditure on energy and other goods. We simulate alternate scenarios of renewables implementation in 2035, taking account of different RES prices, and assess the related societal implications of a gradual transition from fossil fuels to RES. The empirical results offer policymakers a basis for designing appropriate scenarios for the deployment of renewables, with the aim of fostering consumer welfare even in the context of international negotiations.
Highlights
This paper measures the impact of the gradual adoption of renewable energy sources (RES) on consumer welfare
We base our analysis on constructing an empirical measure of the true cost of living (TCL) and the equivalence scale (ES) for the residential sector for 64 countries, representing over two-thirds of the world population, according to World Bank indicators
The TCL is a measure of the cost of living changes -- and of welfare changes -- resulting from energy price movements, assuming that the reference welfare level remains constant over time
Summary
This paper measures the impact of the gradual adoption of renewable energy sources (RES) on consumer welfare. The cost of renewable energy generation is increasingly becoming an issue with relevance and impact for policymakers, as it may impact negatively on household budgets, creating potential substitution and welfare effects with other consumer goods. A household would have to reallocate its limited budget in an optimal way, taking account of the higher price of the new energy source and the conditions for its deployment.
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