Do renewable energy production spillovers matter in the EU?

Abstract

Previous studies have investigated the factors affecting renewable energy production. One important variable for renewable energy production is the spatial spillover of renewable energy production by neighboring countries. The spatial effects of renewable energy production are due to the effect of renewable energy potential similarity and knowledge spillovers. Spatial spillover of renewable energy production from one country to another in the context of spatial model has not been addressed and the novelty of this article is that it fills this gap. The present study explored the issue for European Union countries over 1995–2016 using a spatial dynamic panel data model.The results revealed that an increase in the average of neighboring countries renewable energy production increased the renewable energy production of a given country. Therefore, the results confirmed the presence of spatial spillover of renewable energy production. These results were due to the mechanism of knowledge diffusion, learning, and imitation of neighboring countries’ policies, which have been successful in renewable energy production. In addition, the results suggested that R&D, natural gas, oil and coal prices, the volatility of gas and coal prices, and environmental taxes have a positive effect on renewable energy production. The GDP exerts a U-shaped effect on renewable energy production.