The impact of environmental policy stringency on renewable power capacity: a panel data analysis

Details

Supervisors

Jean-Marie Baland ; Federico Bruno Pontoni

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité approfondie

Abstract

In a world where extreme climate events are increasingly frequent, the urgency for change is undeniable. Policymakers must prioritize environmental protection and implement effective policies to guide nations on the path toward sustainable development. In this context, this research examines the relationship between environmental policy stringency and renewable energy deployment, particularly, stringency's effects on power capacity per capita for renewable technologies and on the substitution of non-renewable energy sources with renewables. The analysis first considers the total installed renewable power capacity and then examines the cases of wind and solar power. Utilizing policy stringency indexes derived from the Climate Actions and Policies Measurement Framework (CAPMF) database as the primary explanatory variable, the study employs two-way fixed effects models to analyze unbalanced panel data from 2000 to 2022 across 17 countries. The analysis highlights also the role of the decreasing levelized cost of electricity (LCOE) in driving the penetration of renewables. The findings reveal that the stringency of targeted instruments, like feed-in tariffs and renewable energy certificates, exerts a significant positive effect. However, the results for overall environmental policy stringency and restrictive auctions are less clear.