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Renewable energy policies and cross-border investment: evidence from M&A in solar and wind energy

Author

Listed:
  • Victoria Shestalova
  • Chiara Criscuolo
  • Nick Johnstone
  • Carlo Menon

Abstract

This study assesses the role of feed-in tariffs (FITs) and renewable energy certificates (RECs) in creating incentives for cross-border investments and for investments in particular technological portfolios via M&A. The analysis explores the dataset on M&As in alternative energy sources worldwide over 2005‑2011. The results suggests that FITs encourage more diversified M&A than RECs. With respect to foreign investment, the study finds a linear relationship between FITs and cross-border M&As in the wind energy sector, but an inverted U-shaped relationship in the solar energy sector. One possible explanation for the latter may lie in reduced policy credibility due to the public finance implications of ‘generous’ FITs. Another possible explanation for this finding concerns the use of high solar FITs by countries whose natural conditions provide little comparative advantage in solar energy, suggesting that low profitability and limited potential of solar energy in those countries might have deterred the entry of foreign investors.

Suggested Citation

  • Victoria Shestalova & Chiara Criscuolo & Nick Johnstone & Carlo Menon, 2014. "Renewable energy policies and cross-border investment: evidence from M&A in solar and wind energy," CPB Discussion Paper 288, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:288
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    Cited by:

    1. Criscuolo, Chiara & Menon, Carlo, 2015. "Environmental policies and risk finance in the green sector: Cross-country evidence," Energy Policy, Elsevier, vol. 83(C), pages 38-56.
    2. Geraldine Ang & Dirk Röttgers & Pralhad Burli, 2017. "The empirics of enabling investment and innovation in renewable energy," OECD Environment Working Papers 123, OECD Publishing.
    3. Soh Young In & Ashby H. B. Monk & Janelle Knox-Hayes, 2020. "Financing Energy Innovation: The Need for New Intermediaries in Clean Energy," Sustainability, MDPI, vol. 12(24), pages 1-25, December.
    4. Mazzucato, Mariana & Semieniuk, Gregor, 2018. "Financing renewable energy: Who is financing what and why it matters," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 8-22.

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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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