Environmental policies and risk finance in the green sector: Cross-country evidence

Chiara Criscuolo and Carlo Menon ()

Energy Policy, 2015, vol. 83, issue C, 38-56

Abstract: This paper provides a detailed description of venture capital investment in the green sector across 29 countries over the period 2005–2010, and identifies the role that policies might play in explaining observed cross-country differences. The analysis is based on a deal-level database of businesses seeking financing, combined with indicators of renewable policies and government R&D expenditures. The econometric analysis relates the number of deals and their volumes in a country to deployment and supply policies using count data and limited dependent variable (Tobit) models. The results suggest that both supply side policies and environmental deployment policies, designed with a long-term perspective of creating a market for environmental technologies, are associated with higher levels of venture capital relative to more short-term fiscal policies. When focusing on policies related to renewable energy generation, the results confirm the positive association of generous feed-in tariffs (FITs) with venture capital investment. However, in the solar sector excessively generous FITs tend to discourage investment, perhaps reflecting a lack of credibility over the longer term. Thus, both sets of results point to long-term policy stability, sustainability and credibility as important policy features to ensure Venture capital backing of innovative and risky ventures in a country's green sector.

Keywords: Environmental innovation; Environmental policies; Environmental technologies; Risk finance; Venture capital (search for similar items in EconPapers)
JEL-codes: G24 Q55 Q58 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (91)

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Working Paper: Environmental Policies and Risk Finance in the Green Sector: Cross-country Evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:83:y:2015:i:c:p:38-56

DOI: 10.1016/j.enpol.2015.03.023

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