Climate Policy Uncertainty and the Demand for Renewable Energy in the United States of America: Evidence from a Non-Linear Threshold Autoregressive Model

Mohammad Arief Rajendra () and Sekar Utami Setiastuti ()
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Mohammad Arief Rajendra: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada
Sekar Utami Setiastuti: Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada

No 202312012, Gadjah Mada Economics Working Paper Series from Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada

Abstract: This study examines the relationship between climate policy uncertainty and the demand for renewable energy in the United States. The primary findings suggest that there is a nonlinear threshold effect resulting from climate policy uncertainty, as measured by the Climate Policy Uncertainty Index (CPU) and the Environmental Policy Uncertainty Index (ENVPU), on renewable energy demand (REC). The findings indicate a negative relationship between the CPU and the REC when the CPU is beyond a specific threshold. This suggests that economic agents adopt a cautious approach, sometimes referred to as the "wait and see" policy, in their renewable energy allocation. In essence, customers may opt to reduce their utilization of renewable energy in favor of alternate sources as a means to circumvent the investment risks associated with renewable alternatives.

Keywords: Climate policy uncertainty; Renewable energy demand; Crude oil price (search for similar items in EconPapers)
JEL-codes: C24 Q28 Q43 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2023-12
New Economics Papers: this item is included in nep-ene and nep-env
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