Abstract
Renewable energy policies are implemented to promote the diffusion of renewable energy sources within the market. However, their effectiveness on renewable electricity capacity remains subject to uncertainty. This paper addresses what renewable policy instruments are effective ways to increase capacity of renewable energy sources. This study employs a 1990–2008 panel dataset to conduct an econometric analysis of policy instruments, namely, feed-in tariffs, quotas, tenders and tax incentives, in promoting renewable energy deployment in 27 EU countries and 50 US states. The results suggest that renewable energy policy instruments play a significant role in encouraging renewable energy sources, but their effectiveness differs by the type of renewable energy policy instruments. Findings reveal that feed-in tariffs, tenders and tax incentives are effective mechanisms for stimulating deployment capacity of renewable energy sources for electricity, while the other commonly used policy instrument –quota –is not.