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How do climate and economic policy uncertainties relate to global fossil fuel price dynamics?

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  • Nawaz, Ali
  • Su, Chi Wei
  • Khan, Shaher Yar

Abstract

As climate and economic policies become more volatile, uncertainty pervades global energy markets. Against this backdrop, we investigate how uncertainties in climate and economic policies relate to global fossil fuel prices, focusing on their asymmetric and time frequency associations. To capture complex dependencies, we apply a quantile-on-quantile regression along with a wavelet method to monthly data from January 1991 to September 2024, capturing dynamic relationships across market conditions and timescales. The findings reveal that heightened CPU tends to correlate with increased fossil fuel prices in the short to medium term, as investors delay decisions and incorporate higher risk premiums. However, in the long run, persistent CPU dampens investment in fossil fuel projects, reducing supply capacity and driving prices downward. Conversely, EPU exerts a mixed influence: it suppresses fossil fuel demand during short-term crises but often fuels price volatility and upward pressure over medium horizons. Overall, global fossil fuel prices respond unevenly to policy shocks, highlighting the need for stable and predictable policy frameworks. Clear, consistent climate and economic policies can dampen extreme price swings in oil, gas, and coal, thereby bolstering global energy security and economic resilience.

Suggested Citation

  • Nawaz, Ali & Su, Chi Wei & Khan, Shaher Yar, 2026. "How do climate and economic policy uncertainties relate to global fossil fuel price dynamics?," The North American Journal of Economics and Finance, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:ecofin:v:83:y:2026:i:c:s1062940826000148
    DOI: 10.1016/j.najef.2026.102594
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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