What drives renewable energy production in MENA Region? Investigating the roles of political stability, governance and financial sector

Policymakers in MENA Region face several choices to increase levels of renewable energy production under various risks and obstacles, including technological and financial severe constraints. This article investigates a crucial question, which has risen in the last few years both in policy and economic literature; that is, the role of various factors in shaping renewable energy production. The core message of this article is that political stability, governance quality and financial development may play an important role to spur renewable energy development in MENA countries. Accordingly, an innovative panel quantile regression model with non-additive fixed effect has been developed to analyse the main drivers of renewable energy production in selected MENA countries over the period 1984-2014. Our findings confirm that the effect of the political stability index on renewable energy production is clearly heterogeneous and supports earlier claims about the importance of political stability to foster the investments in renewable energy sector. Furthermore, we highlighted that governance effectiveness is a significant determinant of the renewable energy production in MENA countries. We notice that the effect is more pronounced at the lower quantile, indicating that impact of governance effectiveness has higher impact in low renewable energy production countries. Our results also argue that the development of financial sector has a positive and statistically significant impact on renewable energy production, across the renewable energy production distribution. It also argues that there is a complementarity relationship between government effectiveness and financial development in promoting the production of renewable energy production. From policy perspectives, our research allows the identification of possible ways of fostering the rate of renewable energy production in MENA Region.