We analyze how an increasing share of Renewable Energy Sources on Electricity generation (RES-E) affects Gross Domestic Product (GDP) and Carbon Dioxide (CO2) emissions using a 3 variable Structural Vector Autoregressive (SVAR) methodology. We used a sample of four countries with different levels of economic development and social and economic structures but a common effort of investment in RES in the last decades. The period considered was 1960 to 2004. The existence of unit roots was tested to infer the stationarity of the variables. Through the impulse response functions (IRF), the SVAR estimation showed that, for all countries in the sample, except for the USA, the increasing RES-E share had economic costs in terms of GDP per capita. There was also an evident decrease of CO2 emissions per capita. The variance decomposition showed that a significant part of the forecast error variance of GDP per capita and a relatively smaller part of the forecast error variance of CO2 per capita were explained by the share of RES-E.

This paper examines the extent to which the introduction and tightening of transfer pricing frameworks deter income shifting strategies by European multinational companies. To do so, we have built an index that measures the transfer pricing framework strictness by host country and year. Then, tax rate differentials are used to capture profit-shifting incentives and are interacted with the strictness index to assess whether the host country's transfer pricing framework impacts profit-shifting behaviour. The index is shown to increase significantly over the sample period, indicating that the scrutiny of related party transactions by European governments has increased over the period 2001–2009. Using a sample of European foreign subsidiaries, the results suggest that the stricter the transfer pricing framework the lower the tax rate difference sensitivity of reported earnings. This indicates that tightening the transfer pricing framework is capable of dissuading multinational companies from shifting profits from higher- to lower-tax countries.