Econonomics of Energy and Environmental Policy

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Mexico's Energy Prospects: Gains from Renewable Sources Over A Fossil Fuel-Dominated Environment

Changing political conditions in Mexico threatens the future of clean energy in the country. A competitive electricity market and ambitious environmental goals were among the priorities of the previous administration, but the current administration aims to increase revenues from the national power company and acquire control of the electricity market at the expense of consumer welfare and the environment. In the medium and long term, however, renewable energies are expected to make significant progress as a very competitive energy source. In this work, we develop an economic framework to provide insights into the economic and environmental effects of promoting the renewable energy industry. Results show that maintaining the status quo will only favour electricity company revenues (for a limited time), but renewable energy won't take off, while a green strategy would boost economic growth, reduce emissions, and ultimately improve social welfare.
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Keywords: Energy transition, renewable energy, partial-equilibrium model, electrification, air pollution emissions, social welfare

DOI: 10.5547/2160-5890.11.2.phan

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Published in Volume 11, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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