Geopolitical Risk as a Determinant of Renewable Energy Investments

Floros Flouros, Victoria Pistikou and Vasilios Plakandaras
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Floros Flouros: Department of History, Politics and International Relations, School of Social Sciences, Arts and Humanities, Neapolis University Pafos, Paphos 8042, Cyprus
Victoria Pistikou: Department of History, Politics and International Relations, School of Social Sciences, Arts and Humanities, Neapolis University Pafos, Paphos 8042, Cyprus

Energies, 2022, vol. 15, issue 4, 1-21

Abstract: The advent of various initiatives around the globe in shaping an energy transition towards a “greener” energy production future sparked a research interest towards the determinants that will shape their success. In this paper, we depart from the relevant literature evaluating the potential effect of geopolitical tensions on renewable energy investments, building on an explicit quantitative approach that provides clear empirical evidence. In doing so, we compile a large panel of 171 economies and measure the effect of geopolitical risk on “green” investing as measured by popular geopolitical risk indices, while controlling for all major variables proposed by literature. Our flexible Autoregressive Distributed Lag model with heterogenous effects across economies suggests that geopolitical risk has a significantly measurable effect on green investments both in the short and the long run. In fact, our results suggest that proper model specification is robust across alternate risk assessments. Overall, our study has direct policy implications suggesting that renewable energy could be an important part of our energy mix only if we take into account its linkages with geopolitical tensions.

Keywords: geopolitical risk; renewable energy sources; energy production; ARDL; GDP; CO 2 emissions (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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