Are public policies towards renewables successful? Evidence from European countries

Qualitative and theoretical literature indicates public policies as a major driver in the development of renewables. This paper empirically tests this claim, within a context of several drivers of renewables, by focusing on a large panel of European countries. Given the presence of heteroskedasticity and contemporaneous correlation resulting from the uniformity of public policies supporting renewables, we use a Panel Corrected Standard Errors estimator. Results are consistent with the usual drivers indicated by the literature and they give empirical support to the notion that public policy measures contribute, as a whole or disaggregated, to wider use of renewables. Specifically, policies of incentives/subsidies (including feed-in tariffs) and policy processes prove to be significant drivers of improved RE use. We show that the usual panel data estimators, random effects and fixed effects, are inefficient and lead to the erroneous exclusion of these policies as renewables’ drivers.

► The impact of public policies on the deployment of renewable energy was examined.
► The random and fixed effects with Panel Corrected Standard Errors estimators were confronted.
► Both random and fixed estimators proved inefficient under contemporaneous correlation.
►  Incentive/subsidy policies and policy processes have been effective in fostering renewables.
► The lobbying effect delays renewables and a continuous strategy for renewables is required.