Energy market liberalization and renewable energy policies in OECD countries

Abstract

We investigate the effect of energy liberalizations on policies that support renewable energy in a long panel of OECD countries. We estimate this effect accounting for the endogeneity of liberalization related to joint decisions within a country’s energy strategy. Using regulation in other industries as instruments, we find that energy liberalization increases the public support to renewable energy. The effect of liberalization is the second largest after the effect of per-capita income and is fully driven by reductions in entry barriers, while the effect of privatization is negative. Finally, our results are robust to dynamic specifications and various policy indicators.