Does Energy Mix Matter? Assessment of the Impacts of Renewable Energy on Environmental Sustainability Outcomes in Selected OECD Countries
Glandon, Ekaterina V.
The World Bank Group's President, Jim Yong Kim, declared 2014 "the year to take action on climate change" (Kim, 2014). Investment in renewable energy is one of the key mechanisms for alleviating environmental impacts of energy production. Many political leaders and businesses around the world recognize the necessity of switching from relying primarily upon finite non-renewable sources to a more diversified energy mix composed not only of fossil fuels, but also of nuclear energy and renewable energy sources. Renewable energy policies are frequently justified by their proponents as a means to create so-called "green jobs" and to achieve improvement in environmental conditions. The general assumption is that promoting renewable energy production accomplishes both economic and environmental goals. Many authors have analyzed the connection between growth and renewable energy policy, but relatively few have studied the link between environmental benefits and renewable energy policy. This paper addresses the latter relationship through a panel data analysis of the share of renewable energy in total energy supply and carbon dioxide (CO2) emissions in twenty-three member countries of the Organization for Economic Co-operation and Development (OECD) between 1992 and 2007. The findings indicate that renewable energy use has a small, but statistically significant effect on reducing CO2 emissions, which is a common measure of environmental conditions. Given these findings, renewable energy policies directed at enhancing energy efficiency, lowering costs of market entry for renewable energy technologies and suppliers, and a gradual decrease of technological dependency on fossil fuels might be viable options to promote the reduction of CO2 emissions. From a policy perspective, these findings suggest that pursuing policies designed to increase the relative use of renewable energy can be expected to have environmental benefits, but that stronger policies would be needed in order achieve the desired environmental outcomes set by the United Nations' Kyoto Protocol.
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