Work

Impact of Economic, Energy and Climate Policy Uncertainties on Multiple Energy Transition Pathways

Year: 2026

Type: article

Abstract: ABSTRACT Achieving net‐zero and sustainable energy goals requires policy frameworks resilient to economic, energy and climate policy uncertainty. This study examines how these uncertainties, alongside globalisation, capital intensity and environmental regulatory stringency, shape three energy transition pathways across OECD countries (1991–2020): the shift from dirtier to less‐dirty non‐renewable sources (DLD), the shift from clean‐to‐cleaner renewable sources (CMC), and a comprehensive energy transition index (CET) combining both. Using the Fully Modified Ordinary Least Squares (FMOLS) estimator to address endogeneity and estimate long‐run co‐integrating relationships, the study finds that climate policy uncertainty is associated with DLD but not with CMC and CET, suggesting it redirects rather than accelerates the transitions. World economic and energy‐related uncertainty exert pathway‐specific effects that vary across the three measures. Globalisation and environmental regulatory stringency emerge as robust, positive drivers of all three pathways. Capital intensity supports the CMC and CET pathways but not DLD, suggesting capital‐intensive investment accelerates renewable deployment more than it improves the non‐renewable energy mix. Economic growth shows a similarly divergent effect, reducing the DLD transition while promoting CMC and CET, reflecting its dual role in reinforcing fossil‐fuel infrastructure and financing cleaner alternatives. These findings carry differentiated policy implications: governments should prioritise reducing climate policy uncertainty through stable, long‐term regulatory commitments, sustain environmental regulatory stringency, and pair capital‐intensive investment with targeted incentives to improve the non‐renewable energy mix, since investment alone does not guarantee progress on every margin. The study offers OECD policymakers pathway‐specific guidance for differentiated, rather than one‐size‐fits‐all, energy and climate policy.

Source: Sustainable Development

DOI: 10.1002/sd.71733

Author: Shahzad Alvi

Institution: Queensland University of Technology

Language: English

Topic: Energy, Environment, Economic Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Affordable and clean energy, Industry, innovation and infrastructure, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $4,250