IDEAS home Printed from https://ideas.repec.org/a/eee/renene/v208y2023icp567-576.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0960148123004019
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.renene.2023.03.098?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pesaran, M. Hashem & Timmermann, Allan, 2005. "Small sample properties of forecasts from autoregressive models under structural breaks," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 183-217.
    2. Rehman, Mobeen Ur & Rashid, Mushab, 2017. "Energy consumption to environmental degradation, the growth appetite in SAARC nations," Renewable Energy, Elsevier, vol. 111(C), pages 284-294.
    3. Fuss, Sabine & Szolgayova, Jana & Obersteiner, Michael & Gusti, Mykola, 2008. "Investment under market and climate policy uncertainty," Applied Energy, Elsevier, vol. 85(8), pages 708-721, August.
    4. Barry G. Rabe, 2008. "States on Steroids: The Intergovernmental Odyssey of American Climate Policy," Review of Policy Research, Policy Studies Organization, vol. 25(2), pages 105-128, March.
    5. Xunan Feng & Y. Ling Lo & Kam C. Chan, 2022. "Impact of economic policy uncertainty on cash holdings: firm-level evidence from an emerging market," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(2), pages 363-385, March.
    6. Peterson, Thomas D. & Rose, Adam Z., 2006. "Reducing conflicts between climate policy and energy policy in the US: The important role of the states," Energy Policy, Elsevier, vol. 34(5), pages 619-631, March.
    7. Qin, Meng & Zhang, Xiaojing & Li, Yameng & Badarcea, Roxana Maria, 2023. "Blockchain market and green finance: The enablers of carbon neutrality in China," Energy Economics, Elsevier, vol. 118(C).
    8. Bompard, E. & Carpignano, A. & Erriquez, M. & Grosso, D. & Pession, M. & Profumo, F., 2017. "National energy security assessment in a geopolitical perspective," Energy, Elsevier, vol. 130(C), pages 144-154.
    9. Su, Chi-Wei & Pang, Lidong & Umar, Muhammad & Lobonţ, Oana-Ramona & Moldovan, Nicoleta-Claudia, 2022. "Does gold's hedging uncertainty aura fade away?," Resources Policy, Elsevier, vol. 77(C).
    10. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    11. Sharif, Arshian & Baris-Tuzemen, Ozge & Uzuner, Gizem & Ozturk, Ilhan & Sinha, Avik, 2020. "Revisiting the role of renewable and non-renewable energy consumption on Turkey’s ecological footprint: Evidence from Quantile ARDL approach," MPRA Paper 100044, University Library of Munich, Germany.
    12. Balcilar, Mehmet & Ozdemir, Zeynel Abidin & Arslanturk, Yalcin, 2010. "Economic growth and energy consumption causal nexus viewed through a bootstrap rolling window," Energy Economics, Elsevier, vol. 32(6), pages 1398-1410, November.
    13. Yi, Sun & Raghutla, Chandrashekar & Chittedi, Krishna Reddy & Fareed, Zeeshan, 2023. "How economic policy uncertainty and financial development contribute to renewable energy consumption? The importance of economic globalization," Renewable Energy, Elsevier, vol. 202(C), pages 1357-1367.
    14. Newbery, David M., 2016. "Towards a green energy economy? The EU Energy Union’s transition to a low-carbon zero subsidy electricity system – Lessons from the UK’s Electricity Market Reform," Applied Energy, Elsevier, vol. 179(C), pages 1321-1330.
    15. Su, Chi Wei & Qin, Meng & Chang, Hsu-Ling & Țăran, Alexandra-Mădălina, 2023. "Which risks drive European natural gas bubbles? Novel evidence from geopolitics and climate," Resources Policy, Elsevier, vol. 81(C).
    16. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(1), pages 85-106.
    17. Xi, Yue & Zeng, Qing & Lu, Xinjie & Huynh, Toan L.D., 2022. "Oil and renewable energy stock markets: Unique role of extreme shocks," Energy Economics, Elsevier, vol. 109(C).
    18. Wu, Ya & Zhu, Qianwen & Zhu, Bangzhu, 2018. "Comparisons of decoupling trends of global economic growth and energy consumption between developed and developing countries," Energy Policy, Elsevier, vol. 116(C), pages 30-38.
    19. Wang, Yizhong & Chen, Carl R. & Huang, Ying Sophie, 2014. "Economic policy uncertainty and corporate investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 227-243.
    20. Aastveit, Knut Are & Natvik, Gisle James & Sola, Sergio, 2017. "Economic uncertainty and the influence of monetary policy," Journal of International Money and Finance, Elsevier, vol. 76(C), pages 50-67.
    21. Frederick van der Ploeg & Armon Rezai, 2020. "Stranded Assets in the Transition to a Carbon-Free Economy," Annual Review of Resource Economics, Annual Reviews, vol. 12(1), pages 281-298, October.
    22. He, Feng & Ma, Yaming & Zhang, Xiaojie, 2020. "How does economic policy uncertainty affect corporate Innovation?–Evidence from China listed companies," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 225-239.
    23. Yosra Ghabri & Ahmed Ayadi & Khaled Guesmi, 2021. "Fossil energy and clean energy stock markets under COVID-19 pandemic," Applied Economics, Taylor & Francis Journals, vol. 53(43), pages 4962-4974, September.
    24. Greene, David L., 2010. "Measuring energy security: Can the United States achieve oil independence?," Energy Policy, Elsevier, vol. 38(4), pages 1614-1621, April.
    25. Guo, Xiaozhu & Liang, Chao & Umar, Muhammad & Mirza, Nawazish, 2022. "The impact of fossil fuel divestments and energy transitions on mutual funds performance," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    26. Qin, Meng & Su, Chi-Wei & Pirtea, Marilen Gabriel & Dumitrescu Peculea, Adelina, 2023. "The essential role of Russian geopolitics: A fresh perception into the gold market," Resources Policy, Elsevier, vol. 81(C).
    27. Zhang, Xun & Yu, Lean & Wang, Shouyang & Lai, Kin Keung, 2009. "Estimating the impact of extreme events on crude oil price: An EMD-based event analysis method," Energy Economics, Elsevier, vol. 31(5), pages 768-778, September.
    28. Ghazi Shukur & Panagiotis Mantalos, 2000. "A simple investigation of the Granger-causality test in integrated-cointegrated VAR systems," Journal of Applied Statistics, Taylor & Francis Journals, vol. 27(8), pages 1021-1031.
    29. Agnolucci, Paolo, 2006. "Use of economic instruments in the German renewable electricity policy," Energy Policy, Elsevier, vol. 34(18), pages 3538-3548, December.
    30. Ozorhon, Beliz & Batmaz, Arda & Caglayan, Semih, 2018. "Generating a framework to facilitate decision making in renewable energy investments," Renewable and Sustainable Energy Reviews, Elsevier, vol. 95(C), pages 217-226.
    31. Fuss, Sabine & Johansson, Daniel J.A. & Szolgayova, Jana & Obersteiner, Michael, 2009. "Impact of climate policy uncertainty on the adoption of electricity generating technologies," Energy Policy, Elsevier, vol. 37(2), pages 733-743, February.
    32. Li, Zheng-Zheng & Li, Yameng & Huang, Chia-Yun & Peculea, Adelina Dumitrescu, 2023. "Volatility spillover across Chinese carbon markets: Evidence from quantile connectedness method," Energy Economics, Elsevier, vol. 119(C).
    33. Peter Erickson & Michael Lazarus & Georgia Piggot, 2018. "Limiting fossil fuel production as the next big step in climate policy," Nature Climate Change, Nature, vol. 8(12), pages 1037-1043, December.
    34. Ren, Xiaohang & Li, Jingyao & He, Feng & Lucey, Brian, 2023. "Impact of climate policy uncertainty on traditional energy and green markets: Evidence from time-varying granger tests," Renewable and Sustainable Energy Reviews, Elsevier, vol. 173(C).
    35. Al Mamun, Md & Uddin, Gazi Salah & Suleman, Muhammad Tahir & Kang, Sang Hoon, 2020. "Geopolitical risk, uncertainty and Bitcoin investment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).
    36. Su, Chi-Wei & Pang, Li-Dong & Tao, Ran & Shao, Xuefeng & Umar, Muhammad, 2022. "Renewable energy and technological innovation: Which one is the winner in promoting net-zero emissions?," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    37. Omer, Abdeen Mustafa, 2008. "Energy, environment and sustainable development," Renewable and Sustainable Energy Reviews, Elsevier, vol. 12(9), pages 2265-2300, December.
    38. Li, Zheng-Zheng & Su, Chi-Wei & Chang, Tsangyao & Lobonţ, Oana-Ramona, 2022. "Policy-driven or market-driven? Evidence from steam coal price bubbles in China," Resources Policy, Elsevier, vol. 78(C).
    39. Hemrit, Wael & Benlagha, Noureddine, 2021. "Does renewable energy index respond to the pandemic uncertainty?," Renewable Energy, Elsevier, vol. 177(C), pages 336-347.
    40. Su, Chi-Wei & Li, Zheng-Zheng & Chang, Hsu-Ling & Lobonţ, Oana-Ramona, 2017. "When Will Occur the Crude Oil Bubbles?," Energy Policy, Elsevier, vol. 102(C), pages 1-6.
    41. Liang, Chao & Umar, Muhammad & Ma, Feng & Huynh, Toan L.D., 2022. "Climate policy uncertainty and world renewable energy index volatility forecasting," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    42. Hofman, Daan M. & Huisman, Ronald, 2012. "Did the financial crisis lead to changes in private equity investor preferences regarding renewable energy and climate policies?," Energy Policy, Elsevier, vol. 47(C), pages 111-116.
    43. Bilgili, Faik & Koçak, Emrah & Bulut, Ümit, 2016. "The dynamic impact of renewable energy consumption on CO2 emissions: A revisited Environmental Kuznets Curve approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 838-845.
    44. van der Ploeg, Frederick & Rezai, Armon, 2020. "The risk of policy tipping and stranded carbon assets," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    45. Qin, Meng & Su, Chi-Wei & Umar, Muhammad & Lobonţ, Oana-Ramona & Manta, Alina Georgiana, 2023. "Are climate and geopolitics the challenges to sustainable development? Novel evidence from the global supply chain," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 748-763.
    46. Omri, Anis & Nguyen, Duc Khuong, 2014. "On the determinants of renewable energy consumption: International evidence," Energy, Elsevier, vol. 72(C), pages 554-560.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Qin, Meng & Su, Chi-Wei & Lobonţ, Oana-Ramona & Umar, Muhammad, 2023. "Blockchain: A carbon-neutral facilitator or an environmental destroyer?," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 604-615.
    2. Zhao, Qian & Ding, Longfei & Pirtea, Marilen Gabriel & Vǎtavu, Sorana, 2023. "Does technological innovation bring better air quality?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 978-990.
    3. Sun, Yanpeng & Song, Yuru & Long, Chi & Qin, Meng & Lobonţ, Oana-Ramona, 2023. "How to improve global environmental governance? Lessons learned from climate risk and climate policy uncertainty," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1666-1676.
    4. Zhang, Xiaojing & Chang, Hsu-Ling & Su, Chi-Wei & Qin, Meng & Umar, Muhammad, 2024. "Exploring the dynamic interaction between geopolitical risks and lithium prices: A time-varying analysis," Resources Policy, Elsevier, vol. 90(C).
    5. Kong, Fanna & Gao, Zhuoqiong & Oprean-Stan, Camelia, 2023. "Green bond in China: An effective hedge against global supply chain pressure?," Energy Economics, Elsevier, vol. 128(C).
    6. Qin, Meng & Hu, Wei & Qi, Xinzhou & Chang, Tsangyao, 2024. "Do the benefits outweigh the disadvantages? Exploring the role of artificial intelligence in renewable energy," Energy Economics, Elsevier, vol. 131(C).
    7. Liu, Fangying & Su, Chi Wei & Tao, Ran & Umar, Muhammad, 2023. "The instability of U.S. economic policy: A hindrance or a stimulus to green financing?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 33-46.
    8. Qin, Meng & Su, Yun Hsuan & Zhao, Zhengtang & Mirza, Nawazish, 2023. "The politics of climate: Does factionalism impede U.S. carbon neutrality?," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 954-966.
    9. Su, Chi-Wei & Qin, Meng & Tao, Ran & Shao, Xue-Feng & Albu, Lucian Liviu & Umar, Muhammad, 2020. "Can Bitcoin hedge the risks of geopolitical events?," Technological Forecasting and Social Change, Elsevier, vol. 159(C).
    10. Sun, Ji-Le & Tao, Ran & Wang, Jiao & Wang, Yi-Fei & Li, Jia-Yi, 2024. "Do farmers always choose agricultural insurance against climate change risks?," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 617-628.
    11. Su, Chi Wei & Shao, Xuefeng & Jia, Zhijie & Nepal, Rabindra & Umar, Muhammad & Qin, Meng, 2023. "The rise of green energy metal: Could lithium threaten the status of oil?," Energy Economics, Elsevier, vol. 121(C).
    12. Wang, Xinghua & Lee, Zhengzheng & Wu, Shuang & Qin, Meng, 2023. "Exploring the vital role of geopolitics in the oil market: The case of Russia," Resources Policy, Elsevier, vol. 85(PB).
    13. Qin, Meng & Su, Chi-Wei & Tao, Ran, 2021. "BitCoin: A new basket for eggs?," Economic Modelling, Elsevier, vol. 94(C), pages 896-907.
    14. Su, Chi-Wei & Wang, Dan & Mirza, Nawazish & Zhong, Yifan & Umar, Muhammad, 2023. "The impact of consumer confidence on oil prices," Energy Economics, Elsevier, vol. 124(C).
    15. Xiao-lin Li & Mehmet Balcilar & Rangan Gupta & Tsangyao Chang, 2016. "The Causal Relationship Between Economic Policy Uncertainty and Stock Returns in China and India: Evidence from a Bootstrap Rolling Window Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(3), pages 674-689, March.
    16. Wang, Lu & Chang, Hsu-Ling & Sari, Arif & Sowah, James Karmoh & Cai, Xu-Yu, 2020. "Resources or development first: An interesting question for a developing country," Resources Policy, Elsevier, vol. 68(C).
    17. Hu, Guoheng & Liu, Shan & Wu, Guo & Hu, Peng & Li, Ruiqi & Chen, Liujie, 2023. "Economic policy uncertainty, geopolitical risks, and the heterogeneity of commodity price fluctuations in China ——an empirical study based on TVP-SV-VAR model," Resources Policy, Elsevier, vol. 85(PA).
    18. Qin, Meng & Zhu, Yujie & Xie, Xin & Shao, Xuefeng & Lobonţ, Oana-Ramona, 2024. "The impact of climate risk on technological progress under the fourth industrial era," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    19. Su, Chi-Wei & Qin, Meng & Tao, Ran & Umar, Muhammad, 2020. "Financial implications of fourth industrial revolution: Can bitcoin improve prospects of energy investment?," Technological Forecasting and Social Change, Elsevier, vol. 158(C).
    20. Shafiullah, Muhammad & Miah, Mohammad Dulal & Alam, Md Samsul & Atif, Muhammad, 2021. "Does economic policy uncertainty affect renewable energy consumption?," Renewable Energy, Elsevier, vol. 179(C), pages 1500-1521.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:renene:v:208:y:2023:i:c:p:567-576. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/renewable-energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.