Geopolitical risk, financial stress and renewable energy transition in China

Xiaomei Su, Shangmei Zhao, Wei Li and Wei Fan

International Review of Financial Analysis, 2025, vol. 107, issue C

Abstract: This study investigates the dynamic interactions between geopolitical risk (GR), financial stress (FS), eco-innovation (EI), and economic growth and the transition to renewable energy (GE) in China from 2000 to 2022. We apply quarterly data and the quantile autoregressive distributed lag (QARDL) method to examine the variability of these relationships across different quantiles, providing a comprehensive understanding of the conditional impacts in diverse market states. We also introduce the GR × EI interaction term, hypothesizing a conditional influence on the energy transition by positing that GR can significantly affect domestic EI. The QARDL approach is instrumental for decomposing short- and long-term effects, revealing how GR might amplify or mitigate the impact of EI on GE. The initial findings reveal a complex synergy in which EI is a potent catalyst for GE, whereas GR presents a spectrum of challenges and opportunities contingent on its interaction with EI. FS generally has a dampening effect that varies across the GE. The study integrates an analysis of China's recent policy shifts toward green energy. This is the first study to quantify GR × EI effects for China with QARDL, offering novel insights into the efficacy and timing of policy interventions. This study enriches the discourse on energy policy, underscoring the importance of understanding the conditional relationships and mechanisms pivotal for China's progress toward a sustainable energy future. The results equip policymakers with strategic insights into navigating the interplay of political, financial, and innovation-related factors to enhance the green energy transition.

Keywords: GR; FS; EI; Renewable energy transition; QARDL; China (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:107:y:2025:i:c:s1057521925007458

DOI: 10.1016/j.irfa.2025.104658

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