Economic welfare impacts from renewable energy consumption: The China experience

Abstract

Over the last years renewable energy sources have increased their share on electricity generation of China due to environmental and security of supply concerns. In this work author assesses the role of both the amount and share of renewable energy consumption in economic welfare using Cobb–Douglas type production functions. This assessment is carried out by multivariate OLS and SPSS software for China from 1978 to 2008. Results indicate that a 1% increase in renewable energy consumption (REC) increases real GDP by 0.120%, GDP per capita by 0.162%, per capita annual income of rural households by 0.444%, and per capita annual income of urban households by 0.368% respectively; the impact of renewable energy consumption share (SREC) on economic welfare is insignificant, and an increasing share of REC negatively affects economic welfare growth to a certain extent. In this paper, the cost, structural demand, accounting mechanism and policy reasons of renewable energy development are interpreted. Marginal effects analysis show that the shape of sound and robust renewable energy institutions and policies would matter for increasing the standards of economic welfare in the context of speeding up renewable energy development and increasing share of renewable energy consumption, especially the goal-oriented policy refinement should be addressed efficiently in improvement households income while increasing share of renewable energy consumption.