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The impact of U.S. political decisions on renewable and fossil energy companies in the era of the Paris Agreement

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  • Gong, Xu
  • Fu, Chengbo
  • Li, Huijing
  • Pirabi, Mansoor

Abstract

This study explores the complex relationship between U.S. political decisions and the financial performance of renewable and fossil energy companies under the Paris Agreement. Employing the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) model and financial ratios, this study spans six distinct temporal phases, beginning with the anticipation of the Paris Agreement negotiations (2013–2015) and culminating in the recommitment of the United States to the Agreement under President Biden's administration (2020–2021). Our findings provide compelling insights into the dynamic interplay between politics and finance in the energy sector. Notably, the average TOPSIS scores for renewable energy companies showed a substantial 6.05% increase for the period leading up to the United States’ formal entry into the Paris Agreement as a result of anticipation and global consensus building. Conversely, the average TOPSIS scores exhibited a significant 7.4% decline for the period when President Trump announced the United States’ withdrawal from the Agreement (2016–2018). These results highlight the profound and lasting impact of political decisions. Our study provides valuable insights into the complex dynamics between political choices and the financial success of energy companies, thereby offering a holistic view of the evolving energy landscape in the era of climate change and global cooperation.

Suggested Citation

  • Gong, Xu & Fu, Chengbo & Li, Huijing & Pirabi, Mansoor, 2024. "The impact of U.S. political decisions on renewable and fossil energy companies in the era of the Paris Agreement," Finance Research Letters, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pa:s1544612324011942
    DOI: 10.1016/j.frl.2024.106165
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    References listed on IDEAS

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    2. Kaur Rajbeer & Kumar Parveen & Radulescu Magdalena & Mohd Sharif & Dascalu Nicoleta, 2025. "Spillover Nexus among Green Cryptocurrency, Sectoral Renewable Energy Equity Stock and Agricultural Commodity: Implications for Portfolio Diversification," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 19(1), pages 1-26.
    3. Li, Huijing & Clancey-Shang, Danjue & Fu, Chengbo & Li, Tianze, 2025. "Does the world need more traditional energy? A comparative analysis of ESG activities, free cash flow, and capital market implications," International Review of Financial Analysis, Elsevier, vol. 99(C).
    4. Fan, Xiaoyun & Shen, Xinyan & Wang, Daoping & Zhou, Cier, 2025. "The Paris Agreement and firms’ carbon information disclosure: Honesty or catering?," International Review of Economics & Finance, Elsevier, vol. 99(C).
    5. Su, Chi-Wei & Wu, Ying & Qin, Meng, 2025. "Preserving energy security: Can renewable energy withstand the energy-related uncertainty risk?," Energy, Elsevier, vol. 320(C).

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