The Role of Market-Oriented Institutions in the Deployment of Renewable Energies: Evidences from Europe

Abstract

This paper investigates the link between economic freedom and the production of energy using renewable sources, with a specific focus on European countries. Using a dynamic panel approach, we find that this relationship is positive and significant. The results of our instrumental variable approach indicate further the causal channel between economic freedom and the deployment of renewable energies. Looking at the subcomponents of the economic freedom index, we find that long term price stability and freedom to trade boost the production of renewable energies. However, the importance given to markets, rather than governments, in the economy has no significant impact.