Energy transition concern: Time-varying effect of climate policy uncertainty on renewables consumption

Abstract

Since COP26, the global energy transition has entered a critical period, and renewable energy has received great attention. Considering the importance of climate policy, this paper explores the impact of the uncertainty originating from its changes on five kinds of renewable energy consumption. First, we use the traditional Granger causality test to detect whether climate policy uncertainty (CPU) affects energy consumption on average. The results show that CPU has a significant influence on solar and wind energy, but not on hydroelectric, geothermal, and biomass energy. Further, we employ a novel time-varying Granger causality test based on three algorithms to discuss the dynamic characteristics of these effects. According to the results from the time-varying testing window, it can be seen that CPU has no impact on geothermal energy over the entire sample period but can affect the consumption of other renewable energy sources discontinuously. In particular, we also investigate the total renewable energy consumption. Therefore, this work confirms that climate policy changes will have an impact on renewable energy consumption from a time-varying perspective, and warns that policymakers related to each kind of energy should pay attention to the risks of climate change during different periods.