Open Access Journal Article

The high price of green energy: Adjustments in general equilibrium

by Henry Thompson a,* orcid
Department of Economics, Auburn University, Auburn, USA
Author to whom correspondence should be addressed.
JEA  2024, 52; 3(1), 52;
Received: 8 May 2023 / Accepted: 28 July 2023 / Published Online: 15 March 2024


The high price of energy due to green energy policy will cause adjustments across the US economy predicted in the present general equilibrium model that includes energy Btu input with capital and labor to produce manufactures and services. This same model in trade theory examines the effects of a tariff on an imported factor of production such as a natural resource or capital.  Corresponding error correction estimates of the reduced form equations of the model in annual 1970-2018 data prove robust and suggest model modifications. A parametric approach to noncompetitive pricing based on unit cost diminishing with output brings the model much closer to the estimates. Manufactures are revealed to have a higher degree of noncompetitive pricing than services. Assuming constant elasticity of substitution production, a weak degree is revealed to provide the best fit to the error correction estimates. The high price of green energy will cause an inelastic decrease in energy input resulting in increased energy revenue. Outputs of both sectors fall, more in manufactures due to its energy intensity. The capital return and wage also fall given the weak substitution of capital and labor relative to the price of energy. The wage rises slightly in the model but falls considerably in the error correction estimate. The only clear winner is energy input with increased revenue. The government owns a large share of hydrocarbon reserves and will benefit from a higher price of energy.

Copyright: © 2024 by Thompson. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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Thompson, H. The high price of green energy: Adjustments in general equilibrium. Journal of Economic Analysis, 2024, 3, 52.
AMA Style
Thompson H. The high price of green energy: Adjustments in general equilibrium. Journal of Economic Analysis; 2024, 3(1):52.
Chicago/Turabian Style
Thompson, Henry 2024. "The high price of green energy: Adjustments in general equilibrium" Journal of Economic Analysis 3, no.1:52.
APA style
Thompson, H. (2024). The high price of green energy: Adjustments in general equilibrium. Journal of Economic Analysis, 3(1), 52.

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