Environmental transition dynamics under external conflict risk: New evidence from European countries

We investigate the dynamic effect of external conflict risk on environmental transition by considering the impacts of eco-innovation, economic growth, and energy consumption in a panel comprising 26 European countries from 2011 to 2020. Using a non-parametric model represented by the panel QARDL, we find that in the short run, a 1% increase in external conflict risk statistically leads to a 0.25% and 0.13% increase in the likelihood of environmental transition for the median and extreme upper quantiles (50th and 95th percentiles), respectively. However, the same increase holds little importance when considering the lower quantile (5th percentile). The indicated effect substantially decreases in the long run, reaching zero across the different quantiles. We also note discrepancies in the impact of energy across various quantile levels. For instance, the effect of population is significant from the 5th to the 90th quintiles. Overall, our findings suggest that enhancing eco-innovation helps reduce environmental transition risk. The results are relevant to the development of environmental policies and provide valuable insights for energy officials, technology stakeholders, and policymakers in their attempts to strengthen resilience during an environmental transition.