Impact of renewable energy expansion policies on the economy, income distribution, and air pollution reduction

Abstract

This study employs a recursive dynamic computable general equilibrium model to evaluate the consequences of renewable energy (RE) expansion policies in South Korea, focusing on their impact on the economy, income distribution, and air pollution reduction. It assumes a scenario in which RE generation constitutes 20% of the total electricity generation by 2030. Various scenarios are explored, including those with and without emission regulations and those considering increased productivity of RE technology. Key findings suggest that expanding RE policies stimulates labor demand and revitalizes upstream industries. However, its effectiveness depends on increasing the efficiency of RE technologies. Carbon regulation, such as emissions trading schemes, reduces greenhouse gases and air pollutants, with environmental benefits outweighing GDP reductions. It decreases income inequality, whereas policies to promote RE exacerbate it, requiring corrective measures. Nevertheless, productivity improvements in the RE sector enhance income distribution.