Carbon Productivity from Clean Power Portfolios: Variable Renewables, Dispatchable Low-Carbon Electricity, and Economic Value Creation in a Global Panel

Abstract

This paper looks at the question of whether low-carbon electricity portfolios composition is relevant to the carbon-efficient economic performance. Instead of considering the energy transition as one renewable aggregate, the analysis breaks these dispatchable clean electricity (hydro and nuclear shares) in to variable renewables (solar and wind shares), and analyzes their relationship to carbon productivity and carbon intensity in the electricity sector. The empirical design is a public country-year panel based on Our World in Data energy repository and approximates two-way fixed-effects models using country-clustered standard errors. The sample size in which the estimation is done is 3602 observations in 163 countries in the period between 2000 and 2022. The baseline performance indicates that the two portfolio components are linked with the higher carbon productivity and the reduced electricity carbon intensity. Increasing dispatchable clean share by ten percentage points is linked to 0.269 log points more carbon productivity and 0.253 log points less carbon intensity of electricity and the analogous values with variable renewables are approximately 0.307 and 0.236 log points. The substantive conclusion is maintained by robustness tests using lagged shares, a balanced panel, winsorization and an alternative greenhouse-gas-intensity outcome. The results indicate that, the business value of decarbonization lies not only in the extent to which an economy uses clean electricity, but also in the structure of the electricity portfolio.