Reducing the reliance on the energy generated from fossil fuels has been the key to mitigating the global energy crisis and environmental degradation. This study attempts to assess the influence of carbon pricing policies on the capacity of renewable energy generation from 2006 to 2022 across 62 countries.
The staggered difference-in-differences method has been used in this study to estimate the renewable energy generation capacity model.
By leveraging the variation in the timing of carbon pricing policies across different countries and time periods, we discover that these policies have significantly boosted the capacity for renewable energy generation. However, this positive effect could only be found in the short term. Moreover, the results of dynamic effects reveal a two-year policy lag effect. By decomposing the treatment effect of carbon pricing policies, we find that early implementation of carbon pricing policies contributes more to renewable energy capacity. These findings suggest that although implementing a single environmental policy, such as a carbon tax or emission trading, may not be sufficient to achieve a net-zero economy, carbon pricing policies are still effective in promoting renewable energy development.
Unlike existing literature, this study offers a novel contribution by exploring the impact of carbon pricing policies on renewable energy capacity through a staggered difference-in-differences (DiD) regression approach. Furthermore, the present study also explores the effect of policy timing as it sheds light on the temporal dynamics of carbon pricing effectiveness, which is overlooked in the existing literature.
