Policy uncertainty and renewable energy: Exploring the implications for global energy transitions, energy security, and environmental risk management

Abstract

Investment in renewable energy is paramount, especially in the context of climate change. However, while many studies investigate the drivers of renewable energy, little is known about how risk or uncertainty affects the distribution of renewables. Using parametric panel data methods, we find a negative long-run relationship between economic policy uncertainty and renewable energy consumption, suggesting that higher levels of country risk may dampen the uptake of renewables. To test the sensitivity of this result, we conducted a non-parametric analysis to explore the time-varying relationship between economic policy uncertainty and renewable energy consumption and the negative relationship holds for most of the sample period. Our findings assist policymakers geared towards energy transition, energy security, and environmental objectives (reducing greenhouse gas emissions) and should consider the economic risk profile of countries when attempting to encourage investment in renewable energy.