Does institutional quality matter for renewable energy promotion in OECD economies?

Abstract

This study examines the effect of institutional quality on renewable energy promotion in OECD economies. The study employs annual data from 1980 to 2014 on 18 OECD economies. The robust panel unit root tests show that all the considered variables have a similar order of integration, indicating that they are nonstationary at their levels but stationary at the first-order differences. The panel cointegration test with structural breaks and cross-section dependence confirms a long-run equilibrium association between institutional quality, renewable energy consumption and control variables. The analysis of long-run estimations displays that better institutional quality makes a unique and substantial contribution to promoting renewable energy consumption. Overall, the study findings offer important policy implications highlighting the importance of institutional quality for the growth of renewable energy and a sustainable world.