Does policy uncertainty threaten renewable energy? Evidence from G7 countries

Abstract

This study evaluates economic policy uncertainty (EPU) impact on renewable energy (RE) in the G7 countries. The finding explores a negative impact of EPU on RE across all quantiles, suggesting that EPU disturbs the macroeconomy, which leads to the decline in RE. However, the impact occurs in the upper quantiles, which recommends that high EPU influences RE rapidly. The coefficients show the varying effects of EPU on RE, as the impact of EPU decreases in Germany when the relationship changes from short to long term. Similarly, the impact increases in Italy, Japan, the UK, and the USA when the relationship changes from short to long run. The sustainable development of RE requires greater economic stability. This is possible if the government makes future policies by involving all stakeholders. Complete information about the planning, implementation, and modification of economic policies should be readily shared with all participants.

Keywords: Economic policy uncertainty; Environmental issues; Quantile on quantile; Renewable energy; Wavelet transforms.