Policy as a “porter” of RE component export or import? Evidence from PV/wind energy in OECD and BRICS

Abstract

Seeking empirical support for the Porter hypothesis (PH) applied to the trade of photovoltaic (PV) and wind energy components, this study examines effects of the interaction between innovative capacity and two kinds of renewable energy (RE) policies, feed-in tariff (FIT) and renewable portfolio standards (RPS), on export in OECD and BRICS countries. Meanwhile, the effect of such policies in import countries is estimated given prominent growth in RE component export by emerging economies and trade disputes with developed countries. The result reveals exporter innovative capacity as negatively correlated with their export when it is interacted with RPS dummy, suggesting inverse evidence for PH. On the other hand, importer annual PV share, which proxies demand for components, was positively associated with their import provided the presence of FIT/RPS. Overall, policies in importer countries exert a robust influence over their import growth, while those in exporter countries may not facilitate or have a negative effect on their export. The result above is in line with the theoretical implication on the effect of RE policy, while it contradicts to the narrowly strong version of PH. This indicates that positive effect of the interaction between policy and innovative capacity on export performance might depend on the distribution of the additional surplus from FIT/RPS.