How the European Union’s renewable energy directives impact the global energy industry : evidence from global stock markets

Abstract

This thesis investigates the impact of renewable energy regulations imposed by the European Union on the energy industry. By employing an event study methodology on three directives dating from 2007 to 2018; The Renewable Energy Directive (2009/28/EC), The Indirect Land Usage Change Directive (2015/1513) and the Renewable Energy Directive II (2018/2001/EU); on a sample of 75 firms, consisting of 30 fossil fuel and 45 renewable energy firms from the regions Europe, North America and Asia-Pacific. An abnormal return is estimated for each company at the time of introduction of the three different directives. The results show significant positive abnormal returns for the energy industry with the introduction of the Renewable Energy Directive. Furthermore, the results show a significant difference between the fossil fuel segment and the renewable energy segment, with positive returns for renewable energy firms, while fossil fuel firms show weak adverse effects. There is no significant impact from the Indirect Land Usage Change Directive, as well as the Renewable Energy Directive II. Finally, there is weak evidence for a difference between regions with the introduction of the Renewable Energy Directive. However, when controlling for additional variables under the regression analysis, the significant effect disappears. This suggests that the regions react similarly to the introduction of renewable energy directives proposed and passed by the European Union.