Elsevier

Global Environmental Change

Volume 29, November 2014, Pages 413-423
Global Environmental Change

Climate policy innovation in the South – Domestic and international determinants of renewable energy policies in developing and emerging countries

https://doi.org/10.1016/j.gloenvcha.2014.04.011Get rights and content

Highlights

Abstract

This article attempts to disentangle the determinants of the adoption of renewable energy support policies in developing and emerging countries. By analyzing policies already implemented in industrialized countries, we focus on the diffusion but not the invention of climate-relevant policies. We look at four different types of policies (renewable energy targets, feed-in tariffs, other financial incentives and framework policies) and consider both domestic factors and international diffusion mechanisms utilizing a discrete-time events history model with a logit link on a self-compiled dataset of grid-based electricity policy adoption in 112 developing and emerging countries from 1998 to 2009. In general, we find stronger support for the domestic determinants of policy adoption, but also substantial influence of international factors. Countries with a larger population and more wealth have a higher probability of adopting renewable energy policies. Only in some specific cases do natural endowments for producing renewable energy encourage governments to adopt policies, and hydro power resources even correlate negatively with the adoption of targets. Among the international determinants, emulation from colonial peers and membership within the EU seem to facilitate policy adoption. International climate finance is less relevant, as the Global Environmental Facility and the Clean Development Mechanism may only increase the adoption of frameworks and targets, but they have no influence on tariffs and incentives.

Introduction

Energy generation and use is one of the most important global sources of greenhouse gas (GHG) emissions. Electricity and heat production accounted for 28% of global emissions in 2005 (WRI, 2012). Renewable energy (RE) is increasingly considered by policy-makers as a key energy form to support and pursue, not only to prevent climate change, but also to improve energy security, reduce local air pollution and generate employment (Mitchell et al., 2011). In addition, as Jordan and Huitema (in press) point out in the introduction to this special issue, the sustained failure to reach an effective international agreement to tackle climate change is resulting in a shift of attention – and of expectations – towards national-level policy-making. For these reasons, in this article we focus on the national adoption of policies that support RE electricity generation.

There is a growing body of literature that focuses on the international diffusion and national adoption of policies that financially support or otherwise promote the deployment of RE, such as feed-in tariffs (FITs), renewable portfolio standards or tax credits. Most of the empirical literature, however, looks at industrialized countries or at subnational units in industrialized countries (Huang et al., 2007, Jacobs, forthcoming, Matisoff, 2008, Vachon and Menz, 2006). Empirical work on RE policies in developing countries mostly focuses on the policies’ impact (Lewis and Wiser, 2007, Wang et al., 2010, Yu et al., 2009), whereas literature on policy adoption is limited to few case studies (e.g. Benecke, 2009). We are not aware of literature that looks at policy diffusion in the area of RE in developing countries, even though recent literature has emphasized the role of international competition in the related field of carbon capture and storage (Roman, 2011).

However, knowing the determinants that encourage developing and emerging country governments to adopt RE policies is very important from an international climate policy perspective; they already generate more than half of global GHG emissions, will substantively expand their power generation facilities in the next few decades and are, therefore, projected to contribute more than 70% of energy-related GHG missions by 2035 (IEA, 2010). Whether policy adoption determinants are the same as in industrialized countries is questionable, given the difference in political systems, international commitments to mitigate climate change, and economic development. For instance, the rapid growth in emerging economies at a time of high oil prices may have encouraged the search for alternative energy forms. Furthermore, less affluent countries may need international financial and capacity building support to implement RE technologies with high investment costs. Therefore, we can expect that international climate finance, both from public sources and the carbon market will help to set up new policies. If we find such an effect, then we can argue that the international community has effective tools to promote national-level policy development in support of climate change mitigation in developing and emerging countries, and this can in turn inform the scholarly debate on international climate change governance. However, according to our knowledge, all these potential differences between developing and developed country policy adoption have not yet been analyzed.

This article starts filling this research gap by analysing the reasons why developing and emerging countries adopt RE support policies. Policies are understood here as national-level public policies, i.e. government decisions (Dye, 1972) on goals or means (Jenkins, 1978). Among the three aspects of climate policy innovation – invention, diffusion and impact of climate policies (Jordan and Huitema, in press), we focus on the diffusion of policies already in place in other countries, as most of the RE policies observed in developing countries have been invented in the North (REN21, 2007). Thereby, we follow Walker's concept of policy innovation as first-time adoption of a policy in a country (Walker, 1969, p. 881). Walker's policy innovation concept of one-time legislative adoption is of course a simplication, as policies are composed of a set of interrelated decisions (Jenkins, 1978). In reality, only the core concepts of policies may be diffused – e.g. the guaranteed electricity tariff in the case of FITs (Jacobs, forthcoming) – while their details – e.g. the actual level of the FIT – are elaborated in a domestic decision process. Therefore, our study can only capture the diffusion process of policies’ core features, while the actual adaptation of policies to the country context would have to be studied by case studies.

Our focus on diffusion rather than invention enables the analysis of RE policies that have already proven to facilitate substantial deployment of RE in the North (e.g. feed-in tariffs). Further advantages are that diffusion processes cover a larger part of developing nations and GHG emissions, and that we can measure the impact of international financial assistance, which will rather promote diffusion of Northern policies and not Southern inventions. As downside, our analysis neglects that developing countries can also be relevant inventors of RE policies, see e.g. the Brazilian Alcohol Programme (Moreira and Goldemberg, 1999), so our analysis will not capture the full set of RE policies but only the ones that diffuse after having been adopted in developed countries.

Following Berry and Berry (2007), we assess whether it is mostly domestic factors that drive adoption – dependence on increasingly expensive fossil fuels, concerns about air pollution, environmental pressure groups, socio-economic and institutional factors – or whether international policy diffusion mechanisms also play a role. We consider that both mechanisms of horizontal diffusion (between countries) and vertical diffusion (from the international to the national level) could be at play. These international diffusion channels may be linked to the diffusion mechanisms outlined in the literature: emulation, learning, coercion (including financial incentives) and competition (Dobbin et al., 2007, Shipan and Volden, 2008, Simmons et al., 2006). Policies could be emulated or learned from neighbouring countries or countries within the same region, with similar cultural, economic and historical background. Diffusion among economic peers, particularly countries within the same trade bloc, may also evidence competition. Furthermore, diffusion may also be enabled by learning and financial incentives connected to international public finance and the carbon market. Disentangling these different diffusion mechanisms is however challenging, particularly in a large-N setting as the one we apply in this article, as several of them can take place simultaneously. Hence, while we follow the existing literature in discussing what mechanisms could be driving the observed diffusion of RE policies, we cannot test with our data which mechanism has actually taken place.

These potential effects are tested using a panel dataset of RE support policies in 163 developing countries over the period from 1998 to 2009. We use a discrete time event history model with a logit link for estimating the probability of policy adoption of four selected policy types (RE targets, FITs, other financial incentives and policy frameworks), including time fixed effects to model the baseline hazard of adopting a policy.

We start the paper by giving an overview of RE policies in developing countries in Section 2. In Section 3 we provide a theoretical framework for RE policy adoption, adapted to developing and emerging countries, and derive hypotheses. After lining out the empirical strategy and operationalization in Sections 4 Empirical strategy and method, 5 Data and operationalization, we present and discuss the results (Section 6), draw conclusions and propose directions for further research (Section 7).

Section snippets

RE support policies in developing countries: a brief overview

Different types of domestic policies can help to overcome the various barriers that prevent the diffusion of RE technologies. Research and development and other technology-push policies are used for fostering innovations and long-term cost reductions in RE. Broader electricity-sector restructuring policies, including the liberalization of the sector, the regulation of access to transmission and distribution grids and the admittance of independent power producers, may also affect RE deployment,

Policy adoption, innovation and diffusion: theoretical background

As has been shown in Table 1, in recent years more and more developing countries have adopted one or various policies to support the development of RE. In agreeing with the mainstream literature in the field, in this paper we consider that a policy innovation takes place whenever a country adopts a new policy for the first time, even if such a policy already exists in other countries (Walker, 1969, p. 881). This allows us to consider both internal (domestic) determinants of policy adoption and

Empirical strategy and method

In the most recent literature, the internal and external determinants of policy innovation are usually estimated by event history analysis, which can be used to model the probability that an event (in our case policy adoption) will take place given a set of covariates, see also Biesenbender and Tosun (forthcoming). In the type of event history analysis applied here, we use area-period data (in our case country-year) and set the dependent variable (policy adoption) to 0 in all periods before

Dependent variables

As dependent variables we use dummies indicating the adoption year of each of the four RE support policies analyzed. The timespan considered starts in 1998, as data on earlier adoption is not reliable, and ends in 2009, and covers 162 emerging and developing countries (see Supplementary Material, Table S1 for a list of the countries included in the analysis). The variables were coded, as usual in event history analysis, with the value of one in the adoption year, zero before adoption, and

Results

For each of the four types of policies in our dependent variables, we have estimated full models including all variables described above and parsimonious models only including variables that had a significant or almost significant impact in at least one of the full models. Likelihood ratio tests, the Akaike Information Criterion and the Bayesian Information Criterion suggest that the parsimonious models are preferable (see Supplementary Material, Tables S4a and S4b). Therefore, we will in the

Conclusions

This article is a first attempt to understand climate policy innovation in the South, a process that has been largely neglected by the policy innovation literature, but which is crucial for global climate change governance. Developing countries have a key role to play in the planned low-carbon transformation, but in the absence of internationally binding regulations on their carbon emissions, achieving such a role requires domestic-level incentives and policies. Concretely, we shed light on the

Acknowledgements

This article benefitted from useful comments by Katharina Michaelowa and several participants at the Climate Policy Innovation workshops 2012 in Amsterdam and Cambridge, particularly Dave Huitema and Andrew Jordan. We also profited from the helpful suggestions by three blind reviewers and by the editors of Global Environmental Change.

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