The Impact of Environmental Policy Stringency on Renewable Energy Production in the Visegrad Group Countries

Abstract

Various environmental policy instruments supporting the development of renewable energy are used on an increasing scale as part of the policy of mitigating climate change and more. In our paper, we examine the influence of environmental policy stringency on renewable energy production in the Czech Republic, Hungary, Poland and Slovakia for the period 1993–2012 after controlling for gross domestic product per capita growth, CO2 emissions per capita and income inequality. We use the Panel Pooled Mean Group Autoregressive Distributive Lag model to analyze the long-run and the short-run relationship between restrictiveness of environmental policy and renewable energy generation. The results reveal that, in the long run, a more stringent environmental policy has a positive impact both on the increase in the absolute volume of renewable energy production, as well as on the replacement of energy from fossil sources. Our main findings indicate that renewable energy production is positively influenced not only by the stringency of instruments aimed directly at the development of this energy sector, but also by the stringency of instruments with other environmental goals and by the overall level of restrictiveness of the environmental policy.