A Global Perspective on the Nexus Between Energy and Stock Markets in Light of the Rise of Renewable Energy

Karishma Ansaram and Mikael Petitjean
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Karishma Ansaram: IESEG School of Management
Mikael Petitjean: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2025005, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: The rise in renewable energy and the associated divestment initiatives from fossil fuel around the world have become prominent in combating climate change. This paper revisits the relationship between energy and stock markets by accounting for renewable energy through the use of the Divisia index method. The paper contributes to the literature by using three renewable energy tariffs rather than relying on clean energy stocks as a proxy for renewable energy. We retrieve data for both the price and consumption of fossil energy (oil, coal and gas) and renewable energy (solar, wind and hydro). We estimate a Vector Autoregressive (VAR) model over the period 2000–2019 across 25 countries globally. Our study identifies a significant time-dependent dynamics between renewable energy and both the energy stock and carbon markets, while fossil energy has no significant influence on those markets. The increasing influence of renewable energy in this nexus signals to policymakers that investors have started to shift their focus of attention from fossil to renewable energy.

Keywords: Renewable energy prices; Fossil energy prices; Stock prices (search for similar items in EconPapers)
JEL-codes: Q1 Q2 Q4 Q5 (search for similar items in EconPapers)
Pages: 50
Date: 2025-01-01
Note: In: Energy Economics, 2024, vol. 131, 107406
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2025005

DOI: 10.1016/j.eneco.2024.107406

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