FEEM working papers "Note di lavoro" series
2012 .051

The Evolution of Renewable Energy Policy in OECD Countries: Aggregate Indicators and Determinants


Authors: Francesco Nicolli, Francesco Vona
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Keywords: Renewable Energy Policy, Political Economy, Product Market Regulation, Lobbying, Policy Indicators
JEL n.: Q42, Q48, D72, O38

Abstract

This paper proposes different methods to aggregate heterogeneous policies for renewable energy. We compare time-varying indicators built using principal component analysis with average-based indicators. The main goal of the paper is to account for the evolution of both types of policy indicators with a set of common variables. Our empirical results are consistent with predictions of political-economy models of environmental policies as lobbying, income and, to a less extent, inequality have expected effects on policy. The brown lobbying power, proxied by entry barriers in the energy sector, has negative influence on the policy indicators even when taking into account endogeneity in its effect. The results are also robust to dynamic panel specifications and to the exclusion of groups of countries. Interestingly, too, corruption has only an indirect effect on policy mediated by entry barriers, while the negative effect of inequality is much stronger for the richer countries.

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