Unveiling the multifaceted role of climate readiness in stabilizing renewables integration: Evidence of energy transition dynamics from a multi-theoretical perspective

Mitigating energy instability is crucial for facilitating the transition from fossil fuel to renewable energy consumption. Following the propositions of green paradox, energy transition, and portfolio rebalancing theory, this study investigates the impact of climate change readiness (CCREAD) on energy stability using panel data from 184 countries spanning 1995 to 2021. Using instrumental variable two-stage least squares regression with Driscoll-Kraay standard errors to address endogeneity and cross-sectional dependence, we find that CCREAD reduces renewable energy volatility. Our dimensional analysis reveals that economic and governance readiness stabilize renewable energy markets through institutional and financial frameworks, while social readiness increases fossil fuel market volatility through shifting public attitudes. Furthermore, regions with higher levels of exchange rate stability, democracy, and energy diversification experience more proactive energy transition and reduced renewable energy volatility due to CCREAD. Importantly, CCREAD plays a crucial role in facilitating energy transition during uncertain times, such as periods of energy uncertainty and economic crises. Additionally, our results indicate that the effectiveness of CCREAD in reducing volatility varies across different distributions of energy volatility, with a weaker effect observed in higher quantiles. These findings offer valuable insights into the role of climate adaptation readiness in advancing sustainable energy transition efforts.