Does decentralization matter for renewable energy sources? The impact of governmental decentralization on the renewable energy transition.

Abstract

The human impact on the environment and climate is growing at an alarming speed, as about half of the cumulative anthropogenic CO2 emissions have occurred since the 1970’s. International efforts to limit the rise in global temperature to 1.5°C above preindustrial levels are undertaken and the reduction of emissions in the energy sector plays a crucial role in this process. Based on the decentralized character of most clean technologies and the policy-based property of the energy transition, this study investigates the impact of (governmental) decentralization and its interdependency with institutional quality on the renewable energy development. For this purpose, a panel data sample, containing 63 developed and developing countries over the timeperiod of 1990 to 2015 is deployed and econometrically evaluated. The results indeed verify a promoting effect of decentralization and its crucial relationship with institutional quality, although, emphasizing its conditional robustness to alternative outcome variable and model specifications. Furthermore, the findings suggest a significantly heterogenous impact of decentralization depending on the level of development and the associated level of institutional quality. The results imply the importance of a simultaneous strengthening of the institutional quality in combination with decentralization to sustain an enhancing impact on the renewable energy deployment.