The impact of U.S. political decisions on renewable and fossil energy companies in the era of the Paris Agreement

Xu Gong, Chengbo Fu, Huijing Li and Mansoor Pirabi

Finance Research Letters, 2024, vol. 69, issue PA

Abstract: This study explores the complex relationship between U.S. political decisions and the financial performance of renewable and fossil energy companies under the Paris Agreement. Employing the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) model and financial ratios, this study spans six distinct temporal phases, beginning with the anticipation of the Paris Agreement negotiations (2013–2015) and culminating in the recommitment of the United States to the Agreement under President Biden's administration (2020–2021). Our findings provide compelling insights into the dynamic interplay between politics and finance in the energy sector. Notably, the average TOPSIS scores for renewable energy companies showed a substantial 6.05% increase for the period leading up to the United States’ formal entry into the Paris Agreement as a result of anticipation and global consensus building. Conversely, the average TOPSIS scores exhibited a significant 7.4% decline for the period when President Trump announced the United States’ withdrawal from the Agreement (2016–2018). These results highlight the profound and lasting impact of political decisions. Our study provides valuable insights into the complex dynamics between political choices and the financial success of energy companies, thereby offering a holistic view of the evolving energy landscape in the era of climate change and global cooperation.

Keywords: U.S. political decisions; Paris Agreement; Renewable energy; Fossil energy; TOPSIS model; Financial ratios; Climate change; Energy sector; Sustainability (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:69:y:2024:i:pa:s1544612324011942

DOI: 10.1016/j.frl.2024.106165

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