From regulation to RENEWABLE: The mediating impact of proactive environmental management on energy choices in MENA firms

This study aims to investigate how environmental regulations, such as market-based energy taxes (EN_TAX) and command-and-control energy performance standards (EPS), influence in-house renewable energy adoption (Ih_RE) among 5075 firms in six MENA countries. Utilizing secondary cross-sectional data from the 2019–2020 EBRD-EIB-WB Enterprise Surveys, the analysis employs PLS-SEM and includes various robustness tests. The findings indicate that a one-unit increase in EPS corresponds to a 6.2 % higher probability of Ih_RE (p < 0.001), with an additional 2.7 % positive effect mediated through proactive environmental management (PEM; p < 0.001). Conversely, a one-unit increase in EN_TAX directly reduces the probability of Ih_RE by 1.3 % (p = 0.015), and its indirect effect via PEM is also negative (−0.2 %) and statistically significant (p < 0.1). Country-level multi-group bootstrap analyses demonstrate notable heterogeneity; in Morocco, EN_TAX is positively associated with Ih_RE (+13.8 %, p = 0.011). These findings have significant policy implications. EPSs consistently encourage firms to generate their own clean power, but higher EN_TAX burdens appear to discourage that shift unless firms receive complementary financial support. Regulators in the MENA region should therefore pair strict efficiency mandates with targeted incentives—grants, rebates, or tax credits—to lower the cost barrier and accelerate the spread of in-house renewables.