This study aims to assess the cumulative effect of environmental policy stringency on the EU’s energy transition up to ten years, controlling for geopolitical risk and a set of climatic and socioeconomic factors. The empirical analysis is based on a sample of 12 EU member countries and the UK over the period 1991-2020. It is performed at the aggregated and disaggregated levels per sub-index of environmental policy stringency and per source of renewable energy. The study outcomes suggest that stringent environmental policies boost energy transition in the EU. This effect is more pronounced in the long run, so a one-point increase in the EPS index is associated with 6.4% increase in the share of renewable energy consumption. The disaggregated analysis reveals that market-based policies are the most influential policies compared to non-market and technology-based policy measures. It also highlights that wind power is the most incentivised renewable energy source by stringent environmental policies, in contrast to hydropower, which is hindered by these policies. The study findings stress the importance of implementing dynamic, adaptive and energy source-specific environmental policies for a sustainable energy transition. • Effect of Environmental policy stringency on energy transition is assessed • Stringent environmental policies are found to boost the EU’s energy transition • Market-based policies are found to be the most influential policies • Wind power was found to be the most incentivised renewable energy source
Mahjoub et al. (Fri,) studied this question.