Thesis Public Defense | VNP30 - Nguyễn Khôi Nguyên

The impact of feed-in tariff on green total factor productivity: cross-country empirical evidence

Student: Nguyễn Khôi Nguyên, VNP-30

Supervisor: Prof.Dr. Lorenzo Pellergrini & Assoc.Prof.Dr. Phạm Khánh Nam

Abstract:

An unprecedented rate of global warming poses rising threats to economies, despite intensive climate actions taken. As a market-pull instrument, the feed-in tariff (FIT) is crucial for the renewable energy transition and carbon mitigation. Still, the programme cannot exert consistent influences on economic outcomes. Building on the directional distance function, the global Malmquist-Luenberger indicator (MLI) provides a non-parametric measure of green total factor productivity (GTFP), decomposed into technological change (TECH) and efficiency change (TECCH). It also credits both desirable and undesirable outputs, serving as an environmentally sensitive alternative to the Solow residual. This paper examines the effect of FIT on GTFP growth and its components across 56 countries from 1990 to 2019. Using temporal and spatial instruments, the continuous updating estimator in the generalised method of moments is adopted to address endogenous treatment effects. The specification also uses Newey-West standard errors to account for autocorrelation and heteroskedasticity across residuals. Empirically, FIT exerts higher annualised growth rates in GTFP and TECCH for implementing parties, except for TECH. Similar patterns are observed among OECD members, in contrast to the offsetting influences of MLI components in non-OECD counterparts. Moreover, overgenerous rates fail to translate into proportionate green performance, whereas FIT exhibits more pronounced gains for maturing renewable technologies. Hence, a combination of country-tailored policies, technology-specific incentives, and augmenting R&D investments is indispensable to complement FIT. This generates simultaneous stimuli for technical dissemination and shifts of the production frontier. Remuneration degression should also be imposed to maximise the baseline advantages of diffusion-driven GTFP growth.

Keywords: Feed-in tariffs; Malmquist-Luenberger productivity indicator; green total factor productivity; technological progress; efficiency improvement.
JEL codes: Q48, D24, O33, O47, C14, C26, H23