Geopolitical risks and energy transition: the impact of environmental regulation and green innovation

Abstract

This study examines the impact of geopolitical risk on energy transition, focusing on the moderating roles of environmental regulations and green innovation within OECD countries. By employing a multivariate linear and nonlinear regression model, we identify a substantial positive effect of geopolitical risk on energy transition. Our analysis indicates that stronger environmental regulations and advancements in green innovation significantly amplify this effect. Through threshold effect bootstrap sampling tests, we detect a nonlinear relationship between geopolitical risk and energy transition at varying levels of environmental regulation and green innovation. We also explore lag effects, revealing that the influence of geopolitical risk on energy transition grows stronger over time. The inclusion of interaction terms in our analysis further clarifies the moderating influences of environmental regulation and green innovation. Utilizing a range of geopolitical risk indicators and regression methods, our findings are robust, consistently highlighting the proactive role of geopolitical risk in fostering energy transition. These insights highlight the importance of integrated strategies that harness environmental regulations and technological innovation to facilitate a resilient and efficient energy transition in the face of challenges posed by geopolitical uncertainties.