Bump in energy prices and their impact on natural resources: Energy transition initiatives in OECD countries

Abstract

Ecosystems and humans suffer from the over-exploitation of natural resources. A growing inequality and environmental crisis demand action, including increasing producer responsibility, extending supply chain legislation, ensuring green public procurement, and promoting circularity. Considering the roles of financial development and international trade, this paper examines whether energy prices and transitions affect natural resources in OECD countries from 1990 to 2020. Our empirical estimates are based on advanced economic methodologies, Fisher effect cointegration, slope heterogeneity, and continuously updated fully modified (CUP-FM) and bias-corrected (CUP-BC) estimators. The result indicates that the increase in energy prices and the transition to a sustainable energy system have improved natural resources. The result suggests that energy and natural resource companies are developing dynamic pricing capabilities to cope with volatility and inflation. Energy and natural resource companies believed inflation would be short-lived, protecting them from price hikes due to their value chain position. Policymakers engaged in green growth strategies should facilitate the transition to green growth. As part of the pricing process, we recommend more pricing. This recommendation does not oppose valuation studies. Rather than addressing the most fundamental issues, much effort has been put into the technical details. Research limitations and future directions are discussed.