The role of renewable energy on CO2 emission in the power industry: the impact of tendering as a possible mechanism

Abstract

Carbon dioxide (CO2) is the most important greenhouse gas that produces global warming and climate change. Despite most countries agreed on ambitious targets of CO2 cuts, there is less consensus on the tools through which these targets will be achieved. The deployment of renewable energy into the power industry is one of the core elements for decarbonizing one of the industries with the largest contributor to CO2 emissions. But we still know little about how different regulatory policies for renewable energy impact CO2 emissions from power generation. This study sheds light on these gaps by using three complementary methodologies: Kaya’s decomposition technique for identifying the main drivers of CO2 emissions from power generation, the panel data approach for testing the relationship between renewable energy share in the generation mix and CO2 emission, and matching procedure to estimate the possible causal effect on CO2 emission of auction policy promoting renewable energy in the power industry. Results show that GDP per capita is the main driver pulling up CO2 emission and renewable energy share in power generation is the main driver counteracting it. Furthermore, auction policy, as one way to promote renewable energy, seems to have a causal effect on CO2 emissions per capita from power generation in countries that implemented it compared to a control group of countries that did not implement this policy.