Renewable, fossil fuel, and nuclear energy responses to global shocks: Lessons from China and the United States

This paper evaluates how U.S. primary energy production and Chinese electricity generation from fossil fuels, renewables, and nuclear sources react to geopolitical risk (GPR) and global economic policy uncertainty (GEPU) shocks. Using a Bayesian Vector Autoregressive (BVAR) model for the period 1997–2025, the estimates reveal how these countries accommodate the energy trilemma in the face of common shocks. The results show that the U.S. expands fossil fuel and nuclear production, while China increases renewable energy in response to GPR shocks. Based on impulse response functions, the response in the U.S. is likely driven by investment adjustments and a reorientation of energy policy, whereas in China the short-run production changes appear to reflect mechanical adjustments. However, variance decomposition results indicate persistent long-term effects in both countries, suggesting that installed capacity expansion, investment adjustments, and energy policy reorientation may drive changes in energy production. Given their national characteristics, the findings suggest that the U.S. prioritizes energy security and affordability in uncertain times, whereas China emphasizes the sustainability pillar of the energy trilemma. The main results remain robust when considering global economic policy uncertainty (GEPU) shocks, although some differences emerge: the U.S. increases its renewable energy production, while China decreases its electricity generation from fossil fuels. The empirical models capture effects of uncertainty shocks on energy over a 10-year horizon in both countries, indicating potential investment adjustments and changes in installed capacity. In other words, the energy trilemma is sensitive to the type of shock. This paper contributes to the literature by providing a comprehensive view of how renewable, nuclear, and fossil fuel energy respond simultaneously to common global shocks within the framework of the energy trilemma.