Effectiveness of renewable energy incentives on sustainability: evidence from dynamic panel data analysis for the EU countries and Turkey

We aim at analyzing the influence of incentive policies on renewable energy deployment in European Union countries and Turkey over the 2000–2018 period. Applying both panel fixed effect and the dynamic panel estimation methods, we compared the results of these two different techniques. Moreover, we included “net metering” that has not been analyzed before, in our policy toolkit, that includes a large number of incentives. Our data cover longer time series than the previous studies in the literature, and it provides new results of different renewable energy policies and drivers for analyzed countries. Empirical findings show that while grants, Research and Development, tax, certification, and policy support have positive and statistically significant impacts on the renewable energy capacity, direct investments, loan, and net metering instruments have no stimulating effect on the renewable energy deployment. These results indicate the deterrent impact of regulations and direct investments on capacity of electricity generated from renewable energy. Moreover, our estimation results reveal that fossil energy consumption, nuclear energy, and GDP are important drivers of renewable energy deployment while net import (energy security) and CO2 emissions are not. Our study highlights the importance of research and development activities, tax incentives, and efficient policy design in transition to green economy in the countries analyzed. Following the detailed discussion of the results, possible policy implications are presented at the end of the study.