Does an environmental policy bring to green innovation in renewable energy?

Abstract

This research examines the effect of environmental policy stringency on green innovation in renewable energy technology and whether the green innovation response differs with varying degrees of environmental policy. Based on panel data of 33 countries over the period 1990–2015, we show that a stringent environmental policy does encourage green innovation in renewable energy technology, and this impact is more pronounced in OECD countries and high-income countries. More specifically, a stringent non-market-based environmental policy induces more patents in renewable energy generation. The findings also show that a stringent environmental policy yields green innovation for geothermal energy, hydro energy, and marine energy, but not for wind energy and solar energy. Heterogeneity analysis suggests that innovation capacity and environmental pressure enhance the impact of environmental policy stringency on green innovation in the renewable energy field. Finally, the paper presents that clean energy investment plays the role of a mechanism through which environmental policy stringency spurs green innovation in the renewable energy field, offering insights into the influence of environmental policy stringency on green innovation.