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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. Fei Su & Feifan Wang & Yahua Xu, 2025. "Economic Policy Uncertainty and Volatility Spillovers Among International Stock Market Indices During the COVID-19 Outbreak," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(1), pages 237-266, March.
    2. Bucciarelli, Pauline & Hache, Emmanuel & Mignon, Valérie, 2025. "Evaluating criticality of strategic metals: Are the Herfindahl–Hirschman Index and usual concentration thresholds still relevant?," Energy Economics, Elsevier, vol. 143(C).
    3. 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.
    4. He, Ruofan & Wan, Panbing, 2024. "Electricity market integration in China: The role of government officials’ hometown ties," Energy, Elsevier, vol. 303(C).
    5. Ben Jabeur, Sami & Bakkar, Yassine & Cepni, Oguzhan, 2025. "Do global COVOL and geopolitical risks affect clean energy prices? Evidence from explainable artificial intelligence models," Energy Economics, Elsevier, vol. 141(C).
    6. Peng, Yi-Ting & Chang, Tsangyao & Ranjbar, Omid, 2025. "Analyzing the dynamics of the persistence of energy-related uncertainty of G7 countries: What does the time-varying SUR-ADF model say?," Energy, Elsevier, vol. 320(C).
    7. 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.
    8. Işık, Cem & Kuziboev, Bekhzod & Ongan, Serdar & Saidmamatov, Olimjon & Mirkhoshimova, Mokhirakhon & Rajabov, Alibek, 2024. "The volatility of global energy uncertainty: Renewable alternatives," Energy, Elsevier, vol. 297(C).
    9. 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.
    10. Hussain, Ihtisham & Saqib, Abdul & Lean, Hooi Hooi, 2025. "Economic policy uncertainty and green energy in BRICS: Impacts on sustainability," Energy, Elsevier, vol. 317(C).
    11. Bruno Di Giusto & Joseph Lavallee & Igor Žilák & Yvonne Hu Di Giusto, 2024. "Public Opinion and the Energy Transition in East Asia: The Case of Taiwan," Sustainability, MDPI, vol. 16(10), pages 1-20, May.
    12. 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.
    13. 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.
    14. Jawadi, Fredj & Rozin, Philippe & Gnegne, Yacouba & Cheffou, Abdoulkarim Idi, 2024. "Geopolitical risks and business fluctuations in Europe: A sectorial analysis," European Journal of Political Economy, Elsevier, vol. 85(C).
    15. Yang, Yi & Zhen, Deyun & Meng, Fuyu, 2024. "Mineral resource management for a sustainable future: Unraveling the role of energy tax in driving green technologies and environmental quality," Resources Policy, Elsevier, vol. 94(C).
    16. Attílio, Luccas Assis, 2025. "Impact of critical mineral prices on energy transition," Applied Energy, Elsevier, vol. 377(PD).
    17. 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).
    18. Su, Chi-Wei & Wu, Ying & Qin, Meng, 2025. "Preserving energy security: Can renewable energy withstand the energy-related uncertainty risk?," Energy, Elsevier, vol. 320(C).
    19. Drăcea Raluca-Mihaela & Cristea Simona Mirela & Nimerenco Ina & Teodor Cristian, 2025. "Interactions and Shocks in Energy Markets – Empirical Evidence from VAR Modeling," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 19(1), pages 5149-5171.

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    • F0 - International Economics - - General

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