The interaction of energy diversification policy and geopolitical uncertainty in sustaining the environment: International evidence

Diversifying the energy mix structure is believed to be a viable strategy to ensure energy security and economic growth. However, its impact on environmental sustainability is still controversial, especially in the geopolitically uncertain world. This research examines the effects of energy diversification, geopolitical risk, and the interaction between these two variables on ecological footprint across countries at different levels of national income. Applying a novel panel quantile regression to a sample of 37 high- and middle-income countries from 1985 to 2018 allows us to track and compare their possible heterogeneous impacts across different levels of ecological footprint. The empirical results suggest that energy diversification could alleviate the ecological footprint in most high-income countries and all middle-income countries. However, not only does geopolitical risk demonstrate a harmful effect on environmental sustainability but it also lessens or even reverts the beneficial environmental impact of energy diversification in most cases, especially in more ruined environment countries. There is the only exception that geopolitical uncertainty could further drive energy diversification towards sustainability targets in less ruined environment countries in the middle-income groups. The ecological condition in middle-income countries suffers more deteriorating effects from geopolitical risk as compared to that in high-income counterparts. Meanwhile, the beneficial environmental effect of energy diversification is negated more strongly by geopolitical uncertainty in the high-income group.