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The Impact of Energy Market Uncertainty Shocks on Energy Transition in Europe

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  • Mehmet Balcilar, David Roubaud, and Muhammad Shahbaz

Abstract

We study effects of energy market uncertainty shocks on energy transition on the 28 European Union countries from 1990 to 2015 using annual frequency data. We assess the effects of oil price as well as the energy market supply, demand, and residual price shocks using a time-varying parameter panel data stochastic volatility model. We show the importance of reducing energy market uncertainty for the success of a clean energy transition in Europe as uncertainties have strong time-varying effects on the transition from fossil fuels to renewable energy. The oil price and residual energy price uncertainties are the key factors encouraging renewable energy transition that reduces the vulnerability of economies to energy shocks. Energy supply shocks affect the transition negatively while the demand shocks work similarly to residual energy prices shocks, requiring a robust energy base that is less volatile. The paper also discusses policy recommendations.

Suggested Citation

  • Mehmet Balcilar, David Roubaud, and Muhammad Shahbaz, 2019. "The Impact of Energy Market Uncertainty Shocks on Energy Transition in Europe," The Energy Journal, International Association for Energy Economics, vol. 0(The New E).
    • Handle: RePEc:aen:journl:ej40-si1-roubau
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    Cited by:

    1. Akan, Taner, 2023. "Can renewable energy mitigate the impacts of inflation and policy interest on climate change?," Renewable Energy, Elsevier, vol. 214(C), pages 255-289.
    2. Su, Chi-Wei & Khan, Khalid & Umar, Muhammad & Chang, Tsangyao, 2022. "Renewable energy in prism of technological innovation and economic uncertainty," Renewable Energy, Elsevier, vol. 189(C), pages 467-478.
    3. Isaac Appiah-Otoo, 2021. "Impact of Economic Policy Uncertainty on Renewable Energy Growth," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 2(1), pages 1-5.
    4. Alola, Andrew Adewale & Akadiri, Seyi Saint, 2021. "Clean energy development in the United States amidst augmented socioeconomic aspects and country-specific policies," Renewable Energy, Elsevier, vol. 169(C), pages 221-230.
    5. Yongliang Zhang & Md. Qamruzzaman & Salma Karim & Ishrat Jahan, 2021. "Nexus between Economic Policy Uncertainty and Renewable Energy Consumption in BRIC Nations: The Mediating Role of Foreign Direct Investment and Financial Development," Energies, MDPI, vol. 14(15), pages 1-29, August.
    6. Saadaoui, Zied & BOUFATEH, Talel & JIAO, Zhilun, 2023. "On the transmission of oil supply and demand shocks to CO2 emissions in the US by considering uncertainty: A time-varying perspective," Resources Policy, Elsevier, vol. 85(PB).

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    JEL classification:

    • F0 - International Economics - - General

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