Geopolitical risk, financial development, and renewable energy consumption: empirical evidence from selected industrial economies.

Abstract

The rapid rise in climate and ecological challenges have allowed policymakers to introduce stringent environmental policies. In addition, financial limitations may pose challenges for countries looking to green energy investments as energy transition is associated with geopolitical risks that could create uncertainty and dissuade green energy investments. The current study uses PTR and PSTR as econometric strategy to investigate how geopolitical risks and financial development indicators influence energy transition in selected industrial economies. Our findings indicate a non-linear DCPB-RE relationship with a threshold equal to 39.361 in PTR model and 35.605 and 122.35 in PSTR model. Additionally, when the threshold was estimated above, financial development indicators and geopolitical risk positively impacts renewable energy. This confirms that these economies operate within a geopolitical context, with the objective of investing more in clean energy. We report novel policy suggestion to encourage policymakers promoting energy transition and advance the sustainable financing development and ecological sustainability.