Europe's energy crisis: Are geopolitical risks in source countries of fossil fuels accelerating the transition to renewable energy?

Erik Hille

Energy Economics, 2023, vol. 127, issue PA

Abstract: This paper provides first empirical evidence on the effect of geopolitical risks in fossil fuel supplier countries on renewable energy diffusion in fossil fuel importing countries and the mediating roles of rising electricity prices and high import dependence. For this end, aggregate measures of geopolitical risk that countries are exposed to through fossil fuel imports are determined. This is done by combining detailed data on bilateral trade patterns for coal, oil, and natural gas of 37 countries in Europe with that on geopolitical risks in supplier countries. Using an instrumental variable approach, the study reveals that geopolitical risks in supplier countries tended to foster renewable energy diffusion in Europe during the period 1991–2021. The effects are especially pronounced for geopolitical risks related to coal and natural gas imports, while the importance of risks related to particular fossil fuels differed for the build-up of the individual renewable energies, i.e. wind, solar, and biomass. Rising electricity prices and high import dependence, particularly for coal, partially amplified the effects on renewable energy diffusion. Despite the high import dependence, natural gas appears to have played in part a role as a bridging technology for energy transition.

Keywords: Geopolitical risk; Renewable energy generation; Electricity price; Import dependence (search for similar items in EconPapers)
JEL-codes: E61 F51 H56 Q42 Q48 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:127:y:2023:i:pa:s0140988323005595

DOI: 10.1016/j.eneco.2023.107061

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