This article explores the economic benefits of clean energy transformation. It observes how countries like Sweden and Germany are leading the charge, using renewable energy to create jobs, boost economic growth, and reduce pollution. Despite challenges, the long-term economic and environmental advantages of clean energy are undeniable.
Introduction
With the days of the efficiency prioritising bygone generation coming towards the end, the young economists are forever intertwined between the two roads of climate change and sustainable development. The red-hot necessity of transformation of energy systems into a soother green resource has become a highly important issue on the global policy agendas of the 21st century.
This article talks about the economic impacts of energy transformation, with a focus on economic growth, job creation, and industrial competitiveness. The article shall talk about how leading countries are opting for stricter energy policies which are environmentally friendly and drive economic growth in their states utilising the 2024 Energy Transformation Index.
Overview of the 2024 Energy Transformation Index
The 2024 Energy Transformation Index, as highlighted by the World Economic Forum, shows that the European countries like Sweden, Denmark, Finland, Switzerland, and France are the top performers in honouring their commitments in switching to renewable energies. They have in the past few decades developed more energy efficient production techniques and adopted greater sustainable energy practices.
Fastly emerging economies such as Brazil and China have also made notable efforts. However, despite such progress, a staggering 83% of countries have regressed in at least one dimension—security, equity, or sustainability—compared to the previous year. This trend nudges us about the challenges in achieving a total energy system transformation worldwide.
Disparities still exist in two main sub-indicators of investments and regulations despite the gap between the developed and developing economies in energy transition performance reducing. Advanced economies typically lead in technological and infrastructure development, whereas developing nations face hurdles related to funding and policy execution.
The 2024 index thus highlights both progress and persistent challenges in global energy transformation efforts.
Economic Growth
A strong correlation exists between energy transformation and economic growth. Reliable and affordable energy fuels economic activity and conversely, economic growth often leads to increased energy demand.
It's important to have the correct kind of energy, not just more energy. Energy that is both inexpensive and reliable is essential to economic activity since it sustains homes, factories, and transportation. Growing energy consumption has historically been a major driver of economic growth—a sort of "grow now, clean up later" mentality. But the formula is evolving. The most advanced economies nowadays are those that are changing, moving away from fossil fuel dependence and towards cleaner, and more sustainable energy sources.
This transformation has led to a creation of new industries and jobs. The cleaner energy reduces pollution and greenhouse gas emissions, attracting environmentally conscious businesses and investors. Lastly, it imparts the world with a sense of security as relying on volatile fossil fuel markets is too risky.
However, this transformation isn't without its challenges. There is a strict need for more firm planning and policy implementations. Nonetheless, the long-term benefits for economic growth and sustainability make energy transformation make it all worth-it.
Almost 60% of Sweden’s power comes from clean sources like wind and water. They also tax fossil fuels, which makes people use less of them and look for more greener options. This has made them less reliant on unsustainable fuels, more innovative in clean tech, and a total leader in sustainability. Along with this, their economy keeps growing utilising cleaner fuels. Hence theirs is an example of sustainability without sacrificing the GDP. The recent Swedish venture to build Aurora, an offshore wind farm in the Baltic Sea, to act as a motor in the net-zero transition in the southern parts of Sweden will advocate for more local electricity production as well as hydrogen production to help decarbonize industry and heavy transports.
Germany, historically, used to be a big player in the consumption of polluting fossil fuels, but now they've invested heavily in cleaner sources of power. This whole transition has been a big job creator, especially in the clean energy sector, with renewable energy demanding more researchers and hands-on workers to aid in installing such units. Hence, it's in turn helping their economy grow overall. Germany's Energiewende is a national project transitioning the country towards a low-carbon, and sustainable energy future. It aims for the state to try for near-zero greenhouse gas emissions by the mid-century. Germany is also aiming to extend it beyond electricity to decarbonize all sectors, aligning with the EU's Green Deal goals.
Job Creation
Renewable energy employment worldwide has continued to grow a lot in the past few decades. This industry was estimated to create roughly 7.3 million jobs in 2012. Meanwhile, the International Renewable Energy Agency, Abu Dhabi and International Labour Organization, Geneva, report highlights the rapid growth of renewable energy jobs, reaching 13.7 million globally in 2023. Asia is on the top with nearly two-thirds of these jobs, with China being the leader. Solar energy is the fastest growing sector, creating almost half of all renewable energy jobs all over the globe, with a surprisingly high number held by women (40%). Wind power and hydropower also provide millions of jobs, with hydropower being particularly beneficial for bringing power and employment to remote areas.
Industrial Competitiveness
Certain studies show that countries that do well in international trade are more likely to adopt sustainable energy practices. This makes sense because successful trading nations have the resources to invest in new technologies, like solar or wind power. They can also discuss and sign better deals with other countries on these projects, which leads to even more innovation and information. On the other hand, the size of a country's ecological footprint plays a role too. A bigger ecological footprint, which measures how much strain the state has been putting on the environment, can weaken the positive effect of global trade on sustainable energy. So, the key is finding a balance, that is keeping the business booming without leaving the environment in a mess.
Challenges
Renewable energy is good for the environment but it faces challenges. The biggest hurdle is upfront cost. Building solar panels and wind turbines is expensive. Although they are cheap to maintain in the long run, the initial investment can be scary for investors.
Unlike coal or nuclear power plants, solar and wind farms need to be spread out over a large area. With land already a scarce resource, this can lead to conflicts with landowners and require additional investment in power lines to bring the electricity where it is needed.
Another challenge is competition from traditional energy sources like coal and gas. These industries are well-established and have a stronger political influence. They often benefit from subsidies and tax breaks, which makes it tougher for much freshly brewed renewable energy to compete on the same price.
Conclusion
The world is evolving. As more economists become aware of the pressing need to address climate change, they are pushing for a more sustainable energy backed future. The 2024 Energy Transformation Index has shown us the disparity between developed and developing nations. In the areas of infrastructure and technology, developed economies often have an advantage over developing ones due to financial and policy constraints.
Businesses and jobs are crafted in the greener energy sector too. Cleaner energy also lowers pollution, which draws in investors and businesses who are concerned about the environment. Germany and Sweden are among the best instances of this.
Denmark and Sweden are the face of the green movement. They are adopting more sustainable practices, production techniques, and moving to renewable sources of energy. Nearly 60% of Sweden's energy comes from the wind and water, while Germany has made some major advances in alternative sources itself. Both countries have seen a spike in economic growth alongside this transition.
Challenges on the green path of sustainability can be overcome. We can build a more secure energy future, more employment, and a healthier planet by investing in clean energy technology and infrastructure. The evidence is clear: a sustainable future is a prosperous future for all.
Footnotes
1. Clean Energy Wire. (2023, September 12). Germany's Energiewende: A brief guide to its history, impact and future. The history of the Energiewende | Clean Energy Wire
2. International Renewable Energy Agency [IRENA]. (n.d.). Energy and jobs. Socio economics of energy transition
3. Power Engineering Magazine [PowerMag]. (2024, February 14). Major offshore wind project part of Swedish renewable energy surge. Major Offshore Wind Project Part of Swedish Renewable Energy Surge
4. Union of Concerned Scientists [UCSUSA]. (2017, March 21). Barriers to renewable energy technologies. Barriers and Solutions to Building Clean Energy in California | Union of Concerned Scientists
5. Energy Research & Social Science ,103, 1083–1094. The role of policy in energy transitions: Lessons from the energy liberalisation era - ScienceDirect
6. World Economic Forum. (2024). Energy Transformation Index 2024. These countries top the Energy Transition Index for 2024 | World Economic Forum
Pic Courtsey- Julia Taubitz at unsplash.com
(The views expressed are those of theo author and do not represnt views of CESCUBE.)
