Energy Transition Scenarios in Russia: Effects in a Macroeconomic General Equilibrium Model with Rational Expectations
M. Andreev, A. Nelyubina
Energy transition is a significant shift from “brown” to “green” energy sources in the structure of energy consumption. For countries rich in fossil fuels, there are additional reasons hindering the energy transition: loss of export revenue due to a decline in global demand for fossil fuels, as well as the need to shift the structure of domestic production when adapting to green energy.
The study shows that, indeed, under any energy transition scenario, a fossil fuel exporter experiences a loss of welfare. Nevertheless, the macroeconomy of an exporting country allows for the implementation of energy transition scenarios. Calculations based on a general equilibrium model indicate that the scenario of a decline in export revenues from the sale of “brown” energy is the least preferable for the energy transition, in the sense that, firstly, it leads to the greatest decline in welfare, and secondly, actively redirecting “brown” exports to the domestic market actually hinders the energy transition. The scenario of increasing taxes on “brown” energy leads to a much smaller decline in welfare. The study shows that the option of increasing taxes on domestically used “brown” energy, under which “green” production receives subsidies, leads to a smaller decline in welfare and a faster energy transition than in the case of transferring to households the taxes levied on all “brown” energy produced, including that supplied abroad. Finally, the scenario leading to the smallest welfare losses and long-term growth in output and consumption is stimulating productivity in the “green” energy production sector.
The study also shows that the energy transition process cannot be initiated based solely on promises of future “green” policy measures, although such promises do lead to the early accumulation of “green” productive capital.