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Energy consumption within policy uncertainty: Considering the climate and economic factors

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  • Li, Zheng Zheng
  • Su, Chi-Wei
  • Moldovan, Nicoleta-Claudia
  • Umar, Muhammad

Abstract

Climate and economic policy are closely correlated with energy consumption. This study investigates the bi-directional causality between renewable (REC) and non-renewable energy consumption (NEC) and policy uncertainties. The time-varying bootstrap rolling window causality test considers structural changes and parameter instability. The results show that the causality between REC and climate policy uncertainty (CPU) is both negative and positive, which mainly stems from the attitudes of authorities towards climate change. If the Administration is positive for climate change mitigation, the correlation between REC and CPU is positive; otherwise, it is negative. The nexus between NEC and CPU is mainly positive, except during global financial crisis periods. This reflects that climate policies are affected by financial crises due to financial constraints. For comparison, we further analyse the dynamic correlation between energy consumption and economic policy uncertainty (EPU). EPU has a significant negative impact on REC in most subperiods, while it has a positive impact on NEC. This can be explained by the fact that non-renewable energy is cheap and convenient to use during economic downturns. Moreover, crude oil has strategic reserve value, especially in the turmoil periods. Regarding policy implications, harmonious and coherent climate and economic policies are important for energy transition.

Suggested Citation

  • Li, Zheng Zheng & Su, Chi-Wei & Moldovan, Nicoleta-Claudia & Umar, Muhammad, 2023. "Energy consumption within policy uncertainty: Considering the climate and economic factors," Renewable Energy, Elsevier, vol. 208(C), pages 567-576.
    • Handle: RePEc:eee:renene:v:208:y:2023:i:c:p:567-576
    DOI: 10.1016/j.renene.2023.03.098
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    2. Li, Tianyu & Yue, Xiao-Guang & Waheed, Humayun & Yıldırım, Bilal, 2023. "Can energy efficiency and natural resources foster economic growth? Evidence from BRICS countries," Resources Policy, Elsevier, vol. 83(C).
    3. Yang, Bin & Wu, Qiong & Sharif, Arshian & Uddin, Gazi Salah, 2023. "Non-linear impact of natural resources, green financing, and energy transition on sustainable environment: A way out for common prosperity in NORDIC countries," Resources Policy, Elsevier, vol. 83(C).
    4. Li, Xin & Umar, Muhammad & Zhu, Cun-Bin & Oprean-Stan, Camelia, 2023. "Can geopolitical risk stably predict crude oil prices? A multi-dimensional perspective," Resources Policy, Elsevier, vol. 85(PA).
    5. Mohammad Arief Rajendra & Sekar Utami Setiastuti, 2023. "Climate Policy Uncertainty and the Demand for Renewable Energy in the United States of America: Evidence from a Non-Linear Threshold Autoregressive Model," Gadjah Mada Economics Working Paper Series 202312012, Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada.
    6. Guesmi, Khaled & Makrychoriti, Panagiota & Spyrou, Spyros, 2023. "The relationship between climate risk, climate policy uncertainty, and CO2 emissions: Empirical evidence from the US," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 610-628.
    7. Shiyue Su & Md. Qamruzzaman & Salma Karim, 2023. "Charting a Sustainable Future: The Impact of Economic Policy, Environmental Taxation, Innovation, and Natural Resources on Clean Energy Consumption," Sustainability, MDPI, vol. 15(18), pages 1-34, September.

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    More about this item

    Keywords

    Renewable energy; Non-renewable energy; Climate policy uncertainty; Economic policy uncertainty; Rolling window causality test;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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