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Economic benefits of energy transition

energy transition

There have been many voices defending the urgent need to initiate the energy transition towards a more sustainable energy model. This means replacing fossil fuels, especially coal, with renewable energy sources. In addition to the environmental impact, what are the economic consequences? Is it profitable?

As the climate crisis worsens, governments have been forced to make urgent decisions to empower the energy transition . The goal? To drastically reduce greenhouse gas emissions. Everyone agrees that efforts must be made to achieve this goal, but the problem arises when the economic consequences are considered. Basically, the debate is whether to replace fossil fuels quickly or gradually. In other words, should we continue to rely on coal and oil while the renewable energy sector grows, or should we opt for a 100% sustainable model? Each of these decisions has different implications for the world economy and should be made clear before a decision is taken.

Recent research has shown that switching to renewable energy contributes to GDP growth. Although it is believed that the early stages of this transition may be inefficient, the reality is quite the opposite. In recent decades, governments have supported the fossil fuel industry, the most polluting industry in the world. Clearly, this had a negative impact on the progress of renewable energy, as the two industries are not compatible.

From an economic perspective, the fossil fuel industry negatively affects consumer welfare by keeping prices higher than necessary due to lack of competition. Rising prices boost GDP, making the fossil industry profitable and slowing the progress of a green economy. To reduce inflation, competition between industries should be promoted. Such competition is productive and brings greater benefits to all, as it encourages innovation, more competitive prices and better products for the market.

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