Clean or dirty energy: evidence of corruption in the renewable energy sector

Abstract

This paper studies the link between public policy and corruption for the case of wind energy. We show that publicly subsidized renewable energy can attract criminal appetites and favor the formation of criminal associations between entrepreneurs and politicians able to influence the licensing process. The insights of a simple model of political influence by interest groups are tested empirically using Italian data for the years 1990-2007. Using a difference in difference approach we quantify the impact of a Green Certificate policy aimed at supporting renewables, and find robust evidence that criminal association activity increased more in windy provinces after the introduction of the generous policy regime. The magnitude of the effect is large: the construction of an average wind park is associated with an increase in criminal activity of 6 % in the treatment compared to the control group. Our findings show that in the presence of poor institutions, even well designed market-based policies can have an adverse impact. The analysis is relevant for countries that are generally characterized by heavy bureaucracies, weak institutions and by large renewable potential.

Impact of corruption in public sector on environmental quality: Implications for sustainability in BRICS and next 11 countries

“…Moreover, the subsidies provided to the traditional fossil fuel-based solutions diminish the competitiveness of the renewable energy solutions. Following the findings of Gennaioli and Tavoni (2016), this segment of the results contributes to the literature in terms of divulging the impact of corruption on environmental quality by impeding renewable energy implementation in emerging economies.…”

Analysis of Public Subsidies to the Solar Energy Sector: Corruption and the Role of Institutions

“…The purpose of this study is to apply the arguments described so far to the case of diffuse resources, in particular to solar energy, assuming that a policy intervention on diffuse resources, such as renewables, may have the same effects in terms of rent-seeking opportunities that characterise concentrated resources. This kind of research is what Gennaioli et al (2016) carried out, under the premise that public plans, especially market-based forms of environmental regulation, introduce elements of scarcity in an otherwise diffuse resources scenario. In turn, scarcity implies the creation of value and, accordingly, encourages economic agents to adopt rent-seeking behaviour, with potential negative consequences for corruption activity.…”

“…As the authors demonstrate, since investments' permissions are crucially conditioned by local politicians' discretion, investments in wind plants are associated with higher levels of corruption. The empirical exercise achieved here tries to retrace the basic idea and the methodological steps employed by Gennaioli et al (2016), focusing on a policy designed to subsidise photovoltaic plants.…”

“…Indeed, notwithstanding the role of surveillance of the GSE, local governments had sufficient discretionary power to alter the outcome of the controls. According to Gennaioli et al (2016), bribing could emerge in this case if agents wanted to obtain the authorizations quickly and "cut through the red tape". Hence, the higher the expected revenues, the higher the expected returns of bribing.…”

“…The case analysed here concerns a policy implemented in Italy since 2005 to promote investments in photovoltaic plants, and its potential impacts on criminal activity. The study retraces an empirical research by Gennaioli et al (2016) that focuses on the wind energy sector and evaluates the consequences of a similar solar energy policy for criminal activity.…”