Do Wealthy States in the USA Have a Disproportionate Advantage in Generating Renewable Energy?

Abstract

This paper tries to establish some causal connection between per capita income and the percentage of renewable energy generated by a state in the US, through the course of 2000-2018. The literature on relations between different macroeconomic factors and renewable energy indicate reverse causality. Moreover, there is not much consensus on whether wealthier states and countries truly have an edge over other countries other than financial and investment ability. Hence, this paper tries to establish a relation between per capita income and renewable energy generation in the context of the USA. Granger Causality was used to establish causal links between the per capita income and the percentage of energy generated by different states that is derived from renewable sources. For states without bidirectional causality, fixed effects regression indicated a statistically significant positive relation between Per Capita Income and renewable energy – a $100 increase in per capita income was associated with a 0.04% increase in the percentage of total energy of a state derived from renewable sources. This points at potential disparities between wealthy and poorer states and adds to the argument of providing more regulatory, financial, and technological aid to poorer states in order to reduce their reliance on non-renewables.