Effects of policy induced uncertainty and geopolitical risk on renewable energy production: Econometric analysis

Petrović, Predrag and Ostojić, Ivana (2025) Effects of policy induced uncertainty and geopolitical risk on renewable energy production: Econometric analysis. Renewable Energy, 25 (123783). pp. 1-15. ISSN 0960-1481, Online : 1879-0682

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Abstract

Various human activities lead to the emission of greenhouse gases, which causes global warming and climate change with a wide range of negative consequences. Since burning of fossil fuels is the most important cause of anthropogenic emission of greenhouse gases, replacement of fossil fuels energy with renewable energy is recognized as one of the most significant tools for combating climate change. Bearing these facts in mind, many authors have analyzed numerous determinants that potentially affect various indicators of renewable energy. Nevertheless, it is obvious that available literature is very scarce when it comes to the impact of policy uncertainty and geopolitical risk on renewable energy production, as well as that the existing studies are burdened with certain methodical weaknesses. This research aims to analyze the impact of policy induced uncertainty and geopolitical risk on renewable energy production. The analysis was conducted on a fairly extensive panel data sample that incorporates 42 countries and time interval of 31 years (1990–2020). The panel data cointegration framework was used which is considered adequate because it eliminates numerous methodical shortcomings of the existing papers. According to the obtained findings, policy induced uncertainty and geopolitical risk do not have any long-term impact on renewable energy production. A positive short-term influence of geopolitical risk is present in 31 % of countries, and a negative one in 19 %. In addition, a positive short-run impact of policy induced uncertainty was detected in 21.4 % of countries, and a negative one in 31 %. Such heterogeneous effects cannot be linked to the geographic location and economic development. Average short-term influence of both variables is insignificant. Finally, the results of the analysis show that a positive average long-term effect has gross domestic product, final energy consumption structure, financial development, greenhouse gases emissions, gross domestic fixed investments and average annual crude oil price. Only international trade has a negative average long-run impact.

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