How environmental policy stringency affects renewable energy investment? Implications for green investment horizons

Abstract

Renewable energy has many benefits, but the most important is its ability to reduce our carbon emissions and help protect the environment. This study looks into the nonlinear effects of environmental policy stringency (EPS) on renewable energy investment in BRICS. To probe the short- and long-term connection, we exploited the nonlinear panel QARDL framework. According to the analysis's results, renewable energy investment rises at nearly all quantiles in response to both short- and long-run positive shocks in EPS. The long-run negative shocks in EPS reduce renewable energy investments at lower and medium quantiles only, whereas the short-term negative shocks in EPS significantly reduce renewable energy investment at most quantiles. At all quantiles, the short and long-run Wald test validates the dissimilar effect of EPS on renewable energy investment. Consequently, policymakers should distinguish between positive and negative shocks in the EPS when considering the effect of EPS on renewable energy investment.