Does renewable energy reduce inflation: Empirical results from OECD and BRICS countries

Abstract

Amid the global climate crisis, one of the effective solutions to stabilize the crisis is closely related to the use of renewable energy. Renewable energy will have fewer price fluctuations than traditional energy, but its price is initially higher due to the expensive cost of capital investment in infrastructure to exploit and maintain green energy. Nowadays, the results from studies showing the impact of green energy on inflation is not consistent; each country and region has different outcomes in terms of the effect of the level of renewable energy usage on inflation. 09/10 countries with the highest renewable energy consumption ratio are countries in the Organization for Economic Cooperation and Development (OECD) and emerging countries (BRICS) groups (Robertson, 2020), but research on the impact of green energy on inflation in those countries has not yet been paid attention. The results of this study indicate that green energy, which is measured as the ratio of sources to total electricity generators, can reduce inflation in the group of BRICS and OECD countries. Among the remaining variables in the research model, including GDP per capita, GDP growth rate, and unemployment rate, only the variable increasing GDP growth causes inflation to increase, while the variable GDP per capita and unemployment rate have opposite impacts on inflation. This implies that when income increases at a certain level, increasing the use of green energy will help the country achieve lower inflation.