Does the European low-carbon policy impact price uncertainty in fossil energy markets?

Jacques Minlend

Energy Economics, 2025, vol. 148, issue C

Abstract: This paper aims to assess the potential effects of a low-carbon policy on price uncertainty in fossil energy markets. For this purpose, we propose text-as-data methods that rely on unsupervised machine-learning algorithms applied to European Union (EU) laws and newspapers. These methods are used to construct two monthly indices over the reference period 1997-2021: (i) a news-based index that reflects uncertainty about the regulatory framework of low-carbon policy as relayed in the press, and (ii) a law-based index that reflects structural changes in European low-carbon policy. Given the support for the carbon phase-out policy, we further examine the extent to which each index relates to price uncertainty dynamics in fossil energy markets. As a result, we find that an increase in the news-based index leads to a positive short-run effect on price uncertainty. Similarly, we observe both dampening short-run and persistent effects of the law-based index on price uncertainty. Thus, stabilizing price uncertainty dynamics through regulations serves as a measure of the efficacy and resilience of European low-carbon policy. This result is robust to the consideration of macroeconomic factors.

Keywords: Low-carbon policy; Textual-data; Unsupervised machine learning; Energy markets; Structural VAR (search for similar items in EconPapers)
JEL-codes: C32 C55 C80 Q40 Q58 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988325004712
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:148:y:2025:i:c:s0140988325004712

DOI: 10.1016/j.eneco.2025.108644

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().