Assessing the impact of renewable energy policies on decarbonization in developing countries

Abstract

This study offers the first consistent attempt to identify how energy sector decarbonization policies have affected the energy mix over the last four decades across more than 100 developing countries. It applies systematic regression analysis to five energy sector decarbonization outcomes and 75+ policy instruments aggregated into seven policy packages. Combining instrumental variables with country interactions and country and time-fixed effects in regional panels helps address potential endogeneity issues. Only a handful of energy policy packages significantly affect decarbonizing developing countries' energy mix, and they more often achieve a negligible or opposite result than intended three years after implementation. Policies that address counterparty risk have the highest immediate effect. Effects of renewable policies on different decarbonization outcomes improve slightly five and seven years after their implementation.