Energy Uncertainty, Geopolitical Conflict, and Militarization Matters for Renewable and Non-renewable Energy Development: Perspectives from G7 Economies

Abstract

Conflict can increase the risk profile of fossil fuel-oriented projects due to disruptions in the energy supply chain and potentially impact the clean energy transition in G7 economies. Thus, the paper investigates the unexplored connections between energy uncertainty, geopolitical conflict, and the militarization index with renewable and non-renewable energy in G7 (1997 to 2022). The application of advanced econometric algorithms, notably the Methods of Moment Quantile Regression, reveals that energy uncertainty has a positive effect on renewable energy consumption and a negative effect on non-renewable energy consumption. Furthermore, the current geopolitical landscape poses unfavorable conditions for both the expansion of renewable energy usage and the utilization of non-renewable energy sources. The global militarism index relies on non-renewable rather than renewable energy sources. The study employed the Impulse Response Function using Bayesian vector autoregression. The study discovered that variations in energy uncertainty initially enhance the usage of renewable energy but ultimately have adverse consequences for renewable and non-renewable energy consumption. Geopolitical risk unfavorably affects both types of energy, but trade positively influences the growth of renewable energy use in G7. The study recommends transparent economic strategies as essential for governments to reduce uncertainty and facilitate a transition to clean energy.