Investigating Determinants of International Clean Energy Investments in Emerging Markets

Abstract

Although renewable energy investments in developing and emerging economies play a crucial role in accelerating the clean energy transition, investments remain limited. Building on previous research, this study takes a unique approach by analyzing determinants of clean energy investments from investors from one country, the United States, which represents the largest single source of investments. Based on panel data sourced from Bloomberg New Energy Finance (BNEF)’s Climatescope, we analyzed renewable energy investments by investors from the United States between 2008 and 2019. The analysis included four factors (i.e., economic, socio-environmental, political, and proactivity) and covered 61 emerging/developing countries. Our results suggest that the most significant factor that determines renewable energy investment by investors from the United States is commercial ties between the investing and recipient country. Our findings also demonstrate the importance of a strong legal system and clean energy promotion mechanisms, such as feed-in tariffs, in recipient countries. When breaking down investment flows, the effects of different economic factors may vary, depending on whether the renewable technology is solar or wind, which further highlights the importance of understanding determinants of renewable energy investments.