Does climate policy uncertainty hinder renewable energy investment in developing countries? Evidence from double machine learning method

This study develops the climate policy uncertainty indexes for 35 developing countries from 2013 to 2022 and investigates their impact on renewable energy investment using a double machine learning approach. The results indicate that the climate policy uncertainty indexes generally exhibit an increasing trend and experience sharp surges during major climate policy events. Moreover, climate policy uncertainty significantly hinders renewable energy investment, a conclusion validated through various robustness tests. Heterogeneity analysis shows climate policy uncertainty hampers hydropower and biomass investment while fostering solar and wind investment. Regionally, the negative impact of climate policy uncertainty on renewable energy investment is more pronounced in lower-income countries and those in the early stages of renewable energy development. The transmission mechanism reveals that climate policy uncertainty impedes renewable energy investment by exacerbating financing constraints, inhibiting green technology innovation, and lowering traditional energy prices. Further analysis suggests that institutional quality can effectively mitigate the adverse effects of climate policy uncertainty. Our findings offer valuable insights for policymakers to manage climate policy uncertainty risks and promote a sustainable energy transition.