Impact of Geopolitical Risks and Financial Markets on Renewable Energy Consumption: Evidence from Emerging Countries

Abstract

As the world's largest economies, emerging markets play a vital role in driving the energy transition. Though, budget constraints and geopolitical threats may hinder the necessary changes. Fiscal constraints may make it difficult for countries to invest in renewable energy infrastructure and technologies, especially in emerging economies with limited financial resources. The geopolitical risks associated with the transition may also cause uncertainty and hinder investment, such as possible disruptions to energy supply networks. In this research, we evaluate the impact of geopolitical risks and financial markets, especially the stock market turnover ratio, on renewable energy consumption in 10 emerging nations from 1985 to 2021. A two-step Generalized Method of Moments System (GMM-system) is evaluated, and the results show that an increase in our two key variables has a positive and significant effect on renewable energy consumption. Our findings indicate that We emphasize in the long-term special effects of geopolitical risks and stock markets are additional obvious in renewable energy policy. Finally, the main political consequences are highlighted.