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The Response of Green Energy and Technology Investment to Climate Policy Uncertainty: An Application of Twin Transition Strategy

Author

Listed:
  • Shaiara Husain

    (Business School, The University of Western Australia)

  • Kazi Sohag

    (Graduate School of Economics and Management, Ural Federal University)

  • Yanrui Wu

    (Business School, The University of Western Australia)

Abstract
Twin transition strategy enforces the indisputable complementary relationship between green and digital transitions. This socio-technical process necessitates a paradigmatic shift to translate policy related uncertainties into twin transition strategies. With this background, the present study investigates the responsiveness of green markets to climate policy uncertainty (CPU) in the US economy by applying the cross-quantilogram approach and recently devised indices of CPU, green equity and green bond from 30th July 2014 to 31ste March 2021. The empirical findings demonstrate that the asymmetric relationship between green financial investment and CPU is positively related in the longer memory during period of high uncertainty. At the bearish state of the market, the responsiveness of green equity returns to CPU is profound compared to green equities in the medium memory. In general, CPU provides more opportunities in the green equity market than in the green bond market. The asymmetric behaviour is more prominent in the long run, implying that both green bond and green equity indices demonstrate higher portfolio performance in the long term than in the short term. This study shows that CPU provides a better explanation for green market responsiveness than other uncertainty indices.

Suggested Citation

  • Shaiara Husain & Kazi Sohag & Yanrui Wu, 2022. "The Response of Green Energy and Technology Investment to Climate Policy Uncertainty: An Application of Twin Transition Strategy," Economics Discussion / Working Papers 22-16, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:22-16
    Note: MD5 = be7989ad25f8fbb1756a392132f3b612
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    Cited by:

    1. Pham, Son D. & Nguyen, Thao T.T. & Do, Hung X., 2024. "Impact of climate policy uncertainty on return spillover among green assets and portfolio implications," Energy Economics, Elsevier, vol. 134(C).
    2. Jianfeng Guo & Kai Zhang & Kecheng Liu, 2022. "Exploring the Mechanism of the Impact of Green Finance and Digital Economy on China’s Green Total Factor Productivity," IJERPH, MDPI, vol. 19(23), pages 1-18, December.
    3. Elsayed, Ahmed H. & Khalfaoui, Rabeh & Nasreen, Samia & Gabauer, David, 2024. "The impact of oil shocks on green, clean, and socially responsible markets," Energy Economics, Elsevier, vol. 136(C).
    4. Wen, Jun & Zhang, Sen & Chang, Chun-Ping & Anugrah, Donni Fajar & Affandi, Yoga, 2023. "Does climate vulnerability promote green investment under energy supply restriction?," Energy Economics, Elsevier, vol. 124(C).
    5. Iqbal, Najaf & Bouri, Elie & Shahzad, Syed Jawad Hussain & Alsagr, Naif, 2024. "Asymmetric impacts of Chinese climate policy uncertainty on Chinese asset prices," Energy Economics, Elsevier, vol. 133(C).
    6. Christidis, Panayotis & Ulpiani, Giulia & Stepniak, Marcin & Vetters, Nadja, 2024. "Research and innovation paving the way for climate neutrality in urban transport: Analysis of 362 cities on their journey to zero emissions," Transport Policy, Elsevier, vol. 148(C), pages 107-123.
    7. Wang, Kai-Hua & Wang, Zu-Shan & Yunis, Manal & Kchouri, Bilal, 2023. "Spillovers and connectedness among climate policy uncertainty, energy, green bond and carbon markets: A global perspective," Energy Economics, Elsevier, vol. 128(C).
    8. Wu, Jiawen & Li, Jing-Ping & Su, Chi-Wei, 2024. "Can green bond hedges climate policy uncertainty in the United States: New insights from novel time-varying causality and quantile-on-quantile methods?," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 1158-1176.
    9. Raza, Syed Ali & Khan, Komal Akram & Benkraiem, Ramzi & Guesmi, Khaled, 2024. "The importance of climate policy uncertainty in forecasting the green, clean and sustainable financial markets volatility," International Review of Financial Analysis, Elsevier, vol. 91(C).
    10. Thobekile Qabhobho & Anokye M. Adam & Emmanuel Asafo-Adjei, 2023. "Do Local and International Shocks Matter in the Interconnectedness amid Exchange Rates and Energy Commodities? Insights into BRICS Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 666-678, November.
    11. Abiodun Moses Adetokunbo & Afe Success Mevhare, 2024. "The interconnectivity between green stocks, oil prices, and uncertainty surrounding economic policy: indications from the United States," SN Business & Economics, Springer, vol. 4(2), pages 1-26, February.
    12. Mengting Fan & Zan Mo & Huijian Fu & Tsung-Hsien Wu & Zili Chen & Yue He, 2024. "Does climate policy uncertainty matter for bank value?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-28, April.

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    More about this item

    Keywords

    Climate Policy Uncertainty; Social Innovation; Green Bond; Green Equity; Spillover; Cross-Quantilogram;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • O35 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Social Innovation

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