From Kyoto to Paris and beyond: A deep dive into the green shift

This study investigates the impact of the Kyoto Protocol and its associated regime, the Paris Agreement, on environmental outcomes and the green transition. We employ a difference-in-differences (DD) specification for country-level panel data from 1995 to 2018. The DD estimates suggest that the Kyoto Protocol of 2005 significantly reduced CO2 emissions and natural resources rents by around 20 percent and decreased the quantity of non-renewable electricity generated by about 36 percent, relative to the pre-Kyoto period. The protocol also led to increases in renewable energy consumption and generation of 18 percent and 60 percent, respectively. Robustness checks using system GMM estimates confirm that the effects of the Kyoto Protocol are likely not biased because of dynamic endogeneity from simultaneity problems or confounding trends. For the Paris Agreement, given documented issues in interpreting the average treatment effects using standard two-way fixed effects (TWFE), we leverage a DD specification with multiple treatment timings. We find no statistically significant effect of the Paris Agreement 2016 on the green transition except that it contributes to reducing CO2 emissions. The absence of a significant impact from the ad hoc Paris Agreement on most outcomes points to the need for greater effort in implementing environmental treaties.