The Effect of Institutions on the Production of Renewable Energy in West African Countries: A Quantitative Assessment

Abstract

In response to pressing challenges of climate change and growing global energy demand, governments and policymakers worldwide have recognised renewable energy as the key solution for mitigating climate change and meeting global energy needs through clean, sustainable energy production. However, several factors may influence the development of renewable energy production, among which institutional quality is important. While the relationship between institutional quality and renewable energy production has been widely studied in various regions, limited research exists on this topic within the context of West Africa. To fill this gap, the present study investigates the effect of institutional quality on renewable energy production in the 15 West African countries from 2000 to 2020. A distinctive feature of this study is the use of two dependent variables: renewable energy production and renewable electricity output as a percentage of total energy production. These variables provide a comprehensive quantitative assessment of renewable energy production and its structure. Using a panel data regression model, this research reveals key findings with important policy implications. The results provide empirical evidence that the quality of institutions has a significant effect on renewable energy production. Moreover, foreign direct investment shows no significant influence on renewable energy production. In contrast, natural resources have a negative effect on renewable energy production, indicating a type of natural resource curse effect. Additionally, economic growth measured by gross domestic product and financial development has a positive effect on renewable energy production. These findings highlight the importance of strengthening institutional frameworks and promoting economic and financial development to scale up renewable energy production in West Africa. Recommendations are also made to policymakers to prioritise anti-corruption efforts, uphold the rule of law, and support mechanisms that improve accountability to create a favourable environment for clean energy investment.