Could U.S.-China conflicts intensify climate transition risks?

This study examines the interaction between U.S.-China tensions (UCT) and climate transition risks (TRI) through integrated full-sample and sub-sample analyses. Our methodological approach systematically investigates the complex relationship between UCT and TRI to determine whether U.S.-China conflicts exacerbate climate transition risks. Our findings reveal that UCT exerts positive and negative effects on TRI. The positive one suggests increased tensions between the U.S. and China worsen transition risks by impairing cooperation, disrupting supply chains, and diverting decarbonisation resources. However, the negative one refutes this view, highlighting that renewable energy market dynamics and technological advances could offset these effects. Additionally, enhanced climate cooperation through policy measures and investments may increase transition risks through accelerating transition pressures. Conversely, TRI also positively and negatively affect UCT, since climate disputes may intensify conflicts, whereas clean energy interdependence and local collaborations could reduce tensions. Against the potential climate crisis, this paper proposes four measures to address U.S.-China conflicts and climate transition risks, including sub-national clean energy cooperation, resilient supply chains, aligned decarbonisation policies, and climate crisis communication channels.