How Much Does Increasing the Share of Non-Fossil Fuels in Electricity Generation Reduce Carbon Dioxide Emissions?

Many international organizations have called for an increased usage of renewable energy as a means to reduce CO2 emissions and address climate change. This paper uses a large panel data set of 117 countries and recently developed panel estimation techniques to answer the question by how much does increasing the share of non-fossil fuels in electricity generation reduce the subsequent carbon dioxide emissions. For the full sample, we find long-run displacement elasticities of approximately -0.75, indicating that a one percent increase in non-fossil fuel electricity generation reduces CO2 emissions per capita from electricity generation by about 0.75%. Long-run displacement elasticities for non-OECD (OECD) countries are approximately - 0.90 (-0.60). These results have a number of policy implications