Skip to main content

How robust is the renewable energy industry to political shocks? Evidence from the 2016 U.S. elections

  • Michaël Aklin

Climate change mitigation relies increasingly on clean technologies such as renewable energy. Despite widespread success, further deployment of renewables has been met with resistance from voters and governments in several countries. How resilient is the renewable energy industry to adverse political events? I use the unexpected election of Donald Trump in the 2016 U.S. presidential race to study this question. As a vocal critic of renewables and a supporter of fossil fuels, his election is a plausible negative shock to the renewable energy sector. I examine stock market data to gauge the reaction of investors. I find that renewable energy stocks were adversely affected by the election. Overall, they experienced a cumulative abnormal loss in share values of about 6 percent on average over the twenty days that followed the election. However, I find that the negative effect is concentrated among non-U.S. firms. U.S. firms, on average, emerged unscathed. Non-U.S. companies, on the other hand, lost over 14 percent of their value in the aftermath of the election. This suggests that markets are more concerned by increasing obstacles to international business than a decrease of federal support for renewables.

Corresponding author
*Corresponding author: Michaël Aklin, Department of Political Science, University of Pittsburgh, and Fellow at the Initiative for Sustainable Energy Policy (ISEP). 4600 WWPH, 230 S. Bouquet Street, Pittsburgh, PA 15260; E-mail:
Hide All

I am grateful to Llewelyn Hughes, Jonas Meckling, two anonymous reviewers, and audience members at the University of Strathclyde for outstanding suggestions. Kelly Morrison and Maxfield Peterson provided excellent research assistance. Alice Kalinowski at Pitt's library kindly helped locate some of the data used in this analysis. The appendix and a replication package are available on Harvard Dataverse,

Hide All
AAPOR. 2016. “An Evaluation of the 2016 Election Polls in the United States.” American Association for Public Opinion Research.
Acemoglu, Daron, Johnson, Simon, and Robinson, James A.. 2001. “The Colonial Origins of Comparative Development: An Empirical Investigation.” American Economic Review 91 (5): 1,369–401.
Aidt, Toke S. 1998. “Political Internalization of Economic Externalities and Environmental Policy.” Journal of Public Economics 69 (1): 116.
Aklin, Michaël. 2018. “The Tortoise and the Hare: Political Constraints on Renewable Energy Deployment.” Working Paper.
Aklin, Michaël, and Urpelainen, Johannes. 2013. “Political Competition, Path Dependence, and the Strategy of Sustainable Energy Transitions.” American Journal of Political Science 57 (3): 643–58.
Aklin, Michaël, and Urpelainen, Johannes. 2018. Renewables: The Politics of a Global Energy Transition. Cambridge, MA: MIT Press.
Baysinger, Barry D. 1984. “Domain Maintenance as an Objective of Business Political Activity: An Expanded Typology.” Academy of Management Review 9 (2): 248–58.
Bazilian, Morgan, Onyeji, Ijeoma, Liebreich, Michael, MacGill, Ian, Chase, Jennifer, Shah, Jigar, Gielen, Dolf, Arent, Doug, Landfear, Doug, and Zhengrong, Shi. 2013. “Re-Considering the Economics of Photovoltaic Power.” Renewable Energy 53: 329–38.
Bechtel, Michael M. and Schneider, Gerald. 2010. “Eliciting Substance from ‘Hot Air’: Financial Market Responses to EU Summit Decisions on European Defense.” International Organization 64 (2): 199223.
Breetz, Hanna, Mildenberger, Matto, and Stokes, Leah. forthcoming. “The Political Logics of Clean Energy Transitions.Business and Politics.
Campbell, Cynthia J., Cowan, Arnold R., and Salotti, Valentina. 2010. “Multi-Country Event-Study Methods.” Journal of Banking & Finance 34 (12): 3,078–90.
Carley, Sanya. 2009. “State renewable energy electricity policies: An empirical evaluation of effectiveness.” Energy Policy 37 (8): 3,071–81.
Casillas, Christian E., and Kammen, Daniel M.. 2010. “The Energy-Poverty-Climate Nexus.Science 330 (6,008): 1,181–82.
Clack, Christopher T. M., Qvist, Staffan A., Apt, Jay, Bazilian, Morgan, Brandt, Adam R., Caldeira, Ken, Davis, Steven J., Diakov, Victor, Handschy, Mark A., Hines, Paul D. H., Jaramillo, Paulina, Kammen, Daniel M., Long, Jane C. S., Morgan, M. Granger, Reed, Adam, Sivaram, Varun, Sweeney, James, Tynan, George R., Victor, David G., Weyant, John P., and Whitacre, Jay F.. 2017. “Evaluation of a proposal for reliable low-cost grid power with 100% wind, water, and solar.” Proceedings of the National Academy of Sciences 114 (26): 6,722–27.
Clausing, Kimberly A. 2010. “Should Tax Policy Target Multinational Firm Headquarters?National Tax Journal 63 (4): 741.
Das, Somnath, Sen, Pradyot K., and Sengupta, Sanjit. 1998. “Impact of Strategic Alliances on Firm Valuation.” Academy of Management Journal 41 (1): 2741.
De Boef, Suzanna, and Keele, Luke. 2008. “Taking Time Seriously.” American Journal of Political Science 52 (1): 184200.
Dinkelman, Taryn. 2011. “The Effects of Rural Electrification on Employment: New Evidence from South Africa.” American Economic Review 101 (7): 3,078–108.
Dyreng, Scott D., Lindsey, Bradley P., Markle, Kevin S., and Shackelford, Douglas A.. 2015. “The Effect of Tax and Nontax Country Characteristics on the Global Equity Supply Chains of US Multinationals.Journal of Accounting and Economics 59 (2–3): 182202.
Ellerman, A. Denny, Convery, Frank J., and De Perthuis, Christian. 2010. Pricing Carbon: The European Union Emissions Trading Scheme. New York: Cambridge University Press.
Fisman, Ray. 2001. “Estimating the Value of Political Connections.” American Economic Review 91 (4): 1,095–02.
Hayek, Friedrich A. 1945. “The Use of Knowledge in Society.” American Economic Review 35 (4): 519–30.
Hillman, Amy J., Keim, Gerald D., and Schuler, Douglas. 2004. “Corporate Political Activity: A Review and Research Agenda.” Journal of Management 30 (6): 837–57.
Hovi, Jon, Sprinz, Detlef F., and Underdal, Arild. 2009. “Implementing Long-Term Climate Policy: Time Inconsistency, Domestic Politics, International Anarchy.” Global Environmental Politics 9 (3): 2039.
Hughes, Llewelyn. 2014. Globalizing Oil: Firms and Oil Market Governance in France, Japan, and the United States. New York: Cambridge University Press.
Hughes, Llewelyn and Meckling, Jonas. 2017. “The Politics of Renewable Energy Trade: The US-China Solar Dispute.” Energy Policy 105: 256–62.
Hughes, Llewelyn and Lipscy, Phillip Y.. 2013. “The Politics of Energy.” Annual Review of Political Science 16 (1): 449–69.
IPCC. 2013. “Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.” Summary for Policymakers. Cambridge, United Kingdom: Cambridge University Press.
Le Quèrè, C., Andrew, R. M., Canadell, J. G., Sitch, S., Korsbakken, J. I., Peters, G. P., Manning, A. C., Boden, T. A., Tans, P. P., Houghton, R. A., Keeling, R. F., Alin, S., Andrews, O. D., Anthoni, P., Barbero, L., Bopp, L., Chevallier, F., Chini, L. P., Ciais, P., Currie, K., Delire, C., Doney, S. C., Friedlingstein, P., Gkritzalis, T., Harris, I., Hauck, J., Haverd, V., Hoppema, M., Goldewijk, K. Klein, Jain, K., Kato, E., Körtzinger, A., Landschützer, P., Lefèvre, N., Lenton, A., Lienert, S., Lombardozzi, D., Melton, J. R., Metzl, N., Millero, F., Monteiro, P. M. S., Munro, D. R., Nabel, J. E. M. S., Nakaoka, S.-I., O'Brien, K., Olsen, A., Omar, A. M., Ono, T., Pierrot, D., Poulter, B., Rödenbeck, C., Salisbury, J., Schuster, U., Schwinger, J., Séférian, R., Skjelvan, I., Stocker, B. D., Sutton, A. J., Takahashi, T., Tian, H., Tilbrook, B., van der Laan-Luijkx, I. T., van der Werf, G. R., Viovy, N., Walker, A. P., Wiltshire, A. J., and Zaehle, S.. 2016. “Global Carbon Budget 2016.” Earth System Science Data 8 (2): 605–49.
Lewis, Joanna I. 2014. “The Rise of Renewable Energy Protectionism: Emerging Trade Conflicts and Implications for Low Carbon Development.” Global Environmental Politics 14 (4): 1035.
Lewis, Joanna I. and Wiser, Ryan H.. 2007. “Fostering a Renewable Energy Technology Industry: An International Comparison of Wind Industry Policy Support Mechanisms.” Energy Policy 35 (3): 1,844–57.
Lin, Chen, Morck, Randall, Yeung, Bernard, and Zhao, Xiaofeng. 2016. “Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China.” NBER Working Paper 22001.
Lindblom, Charles E. 1977. Politics and Markets. New York: Basil Books.
MacKinlay, A. Craig. 1997. “Event Studies in Economics and Finance.” Journal of Economic Literature 35 (1): 1339.
Meckling, Jonas and Hughes, Llewelyn. 2017. “Globalizing Solar: Global Supply Chains and Trade Preferences.” International Studies Quarterly 61 (2): 225–35.
Meckling, Jonas, Kelsey, Nina, Biber, Eric, and Zysman, John. 2015. “Winning Coalitions for Climate Policy.Science 349 (6,253): 1,170–71.
North, Douglass C. 1991. “Institutions.” Journal of Economic Perspectives 5 (1): 97112.
Novan, Kevin. 2015. “Valuing the Wind: Renewable Energy Policies and Air Pollution Avoided.” American Economic Journal: Economic Policy 7 (3): 291326.
Olson, Mancur. 1965. The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge, MA: Harvard University Press.
Ross, Michael L., Hazlett, Chad, and Mahdavi, Paasha. 2017. “Global Progress and Backsliding on Gasoline Taxes and Subsidies.” Nature Energy 2: 16,201.
Schmidt, Tobias S. and Sewerin, Sebastian. 2017. “Technology as a driver of climate and energy politics.Nature Energy 2.
Sivaram, Varun and Kann, Shayle. 2016. “Solar power needs a more ambitious cost target.Nature Energy 1: 16,036 EP –.
Smil, Vaclav. 2010. Energy Transitions: History, Requirements, Prospects. Santa Barbara, CA: Praeger.
Smith, Michael G. and Urpelainen, Johannes. 2014. “The Effect of Feed-In Tariffs on Renewable Electricity Generation: An Instrumental Variables Approach.” Environmental and Resource Economics 57 (3): 367–92.
Stokes, Leah C. 2015a. “Electoral Backlash against Climate Policy: A Natural Experiment on Retrospective Voting and Local Resistance to Public Policy.” American Journal of Political Science 60 (4): 958–74.
Stokes, Leah C. 2015b. “Power Politics: Renewable Energy Policy Change in US States.” Ph.D. Dissertation. Cambridge, MA: MIT Press.
Taylor, Michael. 1987. The Possibility of Cooperation. Cambridge, United Kingdom: Cambridge University Press.
Thelen, Kathleen. 1999. “Historical Institutionalism in Comparative Politics.” Annual Review of Political Science 2 (1): 369404.
Reuters, Thomson. 2017. “Top 100 Global Energy Leaders.” Report.
Unruh, Gregory C. 2000. “Understanding Carbon Lock-In.” Energy Policy 28 (12): 817–30.
Urpelainen, Johannes. 2017. “The Limits of Carbon Reduction Roadmaps.Science 356 (6,342): 1,019.
Vernon, Henderson J., and Ono, Yukako. 2008. “Where Do Manufacturing Firms Locate Their Headquarters?Journal of Urban Economics 63 (2): 431450.
Victor, David. 2009. “The Politics of Fossil-Fuel Subsidies.” International Institute for Sustainable Development. Geneva, Switzerland.
Vidic, R.D., Brantley, S.L., Vandenbossche, J.M., Yoxtheimer, D., and Abad, J.D.. 2013. “Impact of Shale Gas Development on Regional Water Quality.” Science 340: 826–36.
Wang, Yuhua. 2015. “Politically Connected Polluters Under Smog.” Business and Politics 17 (1): 97123.
Wolfers, Justin and Zitzewitz, Eric. 2006. “Prediction Markets in Theory and Practice.” IZA Discussion Papers 1991.
Zaheer, Srilata. 1995. “Overcoming the Liability of Foreignness.” Academy of Management Journal 38 (2): 341–63.
Zhang, Junfeng Jim and Smith, Kirk R.. 2007. “Household Air Pollution from Coal and Biomass Fuels in China: Measurements, Health Impacts, and Interventions.Environmental Health Perspectives 115 (6): 848.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Business and Politics
  • ISSN: -
  • EISSN: 1469-3569
  • URL: /core/journals/business-and-politics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Type Description Title
Supplementary materials

Aklin supplementary material

 PDF (1.0 MB)
1.0 MB


Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed