Economic Institutions, Political Institutions and Renewable Energy Production in Africa

Abstract

ABSTRACT This study investigates the role of economic and political institutions as drivers of renewable energy production in Africa. To achieve this, the study employs panel data of 41 African countries from 2000 to 2017. To deal with endogeneity challenges associated with panel data, we use the two-step Systems Generalized Method of Moments (SGMM). Generally, we find evidence that robust economic institutions are relevant to increasing the level of renewable energy production in Africa. Second, the disaggregated measures of economic institutions show that both size of government and Freedom to trade internationally have a positive effect on renewable energy production. On the contrary, an increase in legal system and property rights reduces the level of renewable energy production. Third, the study finds that political institutions moderate the relationship between economic institutions and renewable energy production. Therefore, toward the goal of promoting SDG 12, governments in Africa should actively strengthen economic institutions to enhance responsible production of energy. However, such efforts will be much more fruitful if the level of political institutions is also strengthened.