Country risk and its impact on renewable energy investment in highly polluted economies.

Abstract

The country's risk may significantly impact every sector of the economy, and the energy sector is no exception. However, no past study has empirically tested the relationship between country risk and renewable energy investment. Therefore, this study is an effort to investigate the relationship between country risk and renewable energy investment in highly polluted economies. We have employed different econometric techniques to analyze the relationship between renewable energy investment and country risk, including the OLS, 2SLS, GMM, and panel quantile regressions. The estimate of country risk influence renewable energy investment negatively in OLS, 2SLS, and GMM models. Similarly, the country's risk negatively impacts the renewable energy investment from the 10th to 60th quantiles in the panel quantile regression model. Moreover, the GDP, CO2 emissions, and technological development help promote renewable energy investment in OLS, 2SLS, and GMM models, while the human capital and financial development do not significantly impact the renewable energy investment. Furthermore, in the panel quantile regression model, the GDP and CO2 emission estimates are positively significant almost at all quantiles, and the estimate of technological development and human capital are positively significant at higher quantiles only. Therefore, the authorities in highly polluted economies should consider the respective countries' risk considerations while formulating rules about renewable energy.