Impact of renewable energies on CO₂ emissions in the OECD

We use a panel database from 36 OECD countries between 1990 and 2019 to assess the causal impact of a substantial increase in renewable energy (an “event”) on subsequent reductions in CO2 emissions in developed countries. We employ an events study design approach to evaluate the effectiveness of renewable energy increases on subsequent changes in CO2 emissions within the specified set of countries. Our findings suggest that there is a 7.4% decrease in CO2 emissions from the electricity sector in the year following an increase in renewable energy, with this decline continuing and reaching a 10% reduction in the subsequent two years. Five years after the initial event, a 5% reduction in emissions persists. Our analysis also reveals a substantial impact on total emissions, with this effect being exclusively transmitted through the electricity sector. The robustness of our findings is demonstrated by their resistance to a wide range of specifications, including variations in the definition of renewable energy events, model specifications, outlier controls, consideration of regional and year heterogeneity, and the use of an environmental policy stringency index as a proxy for global environmental policy.