The essential role of climate policy uncertainty in carbon emissions: a fresh insight.

Abstract

This study assesses the influence of climate policy uncertainty (CPU) on carbon emissions (CE) against the backdrop of economic policy uncertainty (EPU) in the US. The wavelet analysis provides a comprehensive understanding of correlations in the time and frequency domains. The results demonstrate a significant correlation between CPU and CE, which varies across different time periods and frequencies. In the time domain, the results indicate that the CPU and CE move together during certain subperiods. Moreover, there are observable comovements in the frequency domain, particularly in the short to medium range. However, the correlation becomes stronger in the short term when there is no EPU, suggesting a closer interaction between CPU and CE. Therefore, it is crucial for governments to prioritize improving the clarity, credibility, and consistency of climate policies. They should also consider potential economic shocks when designing these policies.