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Uncertain policies, unstable markets: How energy regulation shapes financial outcomes

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  • Peña, Juan Ignacio

Abstract

This paper develops the Energy Policy Uncertainty Index (ENPUI), a news-based measure of regulatory instability in Spain’s energy sector from 1997 to 2022. By systematically capturing policy reversals, tax reforms, and market interventions, ENPUI traces how regulatory shocks affect financial markets. Applying panel quantile regression to energy firms' equity and electricity futures data, we find asymmetric effects that depend on the volatility regime: uncertainty depresses returns in bearish conditions, especially in electricity futures markets, while amplifying volatility under specific regimes. Results highlight the financial costs of policy instability and provide insights for designing credible, climate-consistent policies that foster investment and support the energy transition.

Suggested Citation

  • Peña, Juan Ignacio, 2026. "Uncertain policies, unstable markets: How energy regulation shapes financial outcomes," Economic Analysis and Policy, Elsevier, vol. 90(C), pages 818-833.
    • Handle: RePEc:eee:ecanpo:v:90:y:2026:i:c:p:818-833
    DOI: 10.1016/j.eap.2026.01.056
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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