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Climate Policy Uncertainty and the Demand for Renewable Energy in the United States of America: Evidence from a Non-Linear Threshold Autoregressive Model

Author

Listed:
  • Mohammad Arief Rajendra

    (Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada)

  • Sekar Utami Setiastuti

    (Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada)

Abstract

This study examines the relationship between climate policy uncertainty and the demand for renewable energy in the United States. The primary findings suggest that there is a nonlinear threshold effect resulting from climate policy uncertainty, as measured by the Climate Policy Uncertainty Index (CPU) and the Environmental Policy Uncertainty Index (ENVPU), on renewable energy demand (REC). The findings indicate a negative relationship between the CPU and the REC when the CPU is beyond a specific threshold. This suggests that economic agents adopt a cautious approach, sometimes referred to as the "wait and see" policy, in their renewable energy allocation. In essence, customers may opt to reduce their utilization of renewable energy in favor of alternate sources as a means to circumvent the investment risks associated with renewable alternatives.

Suggested Citation

  • 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.
    • Handle: RePEc:gme:wpaper:202312012
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    File URL: https://econworkingpaper.feb.ugm.ac.id/download/working_paper/202312012.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate policy uncertainty; Renewable energy demand; Crude oil price;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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