Political economy of renewable energy: Does institutional quality make a difference in renewable energy consumption?

Abstract

Abstract The increasingly severe environmental crisis has become one of the most important issues of international debate at present. The acceleration of environmental problems places considerable pressure on individuals, governments, and policymakers. Greenhouse gas emissions caused by fossil-based energy sources have made clean energy sources, such as renewable energy, a strategic choice. Although renewable energy is a key factor in mitigating environmental problems, analysis of its determinants has certain limitations. Despite studies that focus on macroeconomic and environmental determinants of renewable energy, political and institutional factors are neglected. Therefore, to fill the existing gap, the present study analyzes the connection between renewable energy and institutional quality in 38 countries during the period 1990–2015. Economic growth and CO2 emissions are included in the model as control variables. The findings of this study lead to the conclusion that the institutional quality positively affects renewable energy consumption in the long run. Furthermore, CO2 emission is a positive and important determinant of renewable energy consumption. However, economic growth negatively affects renewable energy. In this context, institutional quality is a key strategic choice in promoting the use of renewable energy and solving environmental problems.