How do oil price uncertainty and economic policy uncertainty influence achievement of net-zero emissions targets by 2050? A quantile-based analysis

ABSTRACT

Governments globally have prioritized carbon neutrality and reduction as a response to the intensifying menace of climate change. These objectives align with the United Nations Sustainable Development Goals (UNSDG-13), stressing the imperative to take decisive action on climate change. Thus, this study aimed to assess the impact of oil price uncertainty, economic policy uncertainty, financial development, and renewable energy on ecological proxies (CO₂ emissions, Ecological footprint, and Load capacity factor) using quarterly data spanning from 1990 to 2019. As far as the investigators are aware, this is the first empirical analysis examining the impact of oil price uncertainty on ecological quality. To achieve this, we employed advanced techniques, including quantile-on-quantile KRLS (QQKRLS) and quantile-on-quantile Granger causality (QQGC), to analyse the interconnections among these variables. The findings based on the load capacity factor exposed that renewable energy, economic policy uncertainty, financial development, and economic growth positively contribute to ecological quality, whereas oil price uncertainty has a detrimental effect. Additionally, as a measure of robustness, CO₂ emissions and ecological footprint were included in the analysis, demonstrating comparable outcomes when assessed alongside the load capacity factor model. Furthermore, QQGC results demonstrated that all regressors significantly forecast ecological quality. Drawing from the findings, policy interventions ought to prioritize incentivizing the adoption of renewable energy, mitigating economic policy uncertainty, fostering financial development, and stimulating economic growth as pivotal strategies for augmenting ecological quality. Furthermore, integrating measures to alleviate oil price uncertainty stands as a crucial imperative for ensuring environmental sustainability.

HIGHLIGHTS

• The study examined the effect of oil price uncertainty and economic policy uncertainty on ecological quality

• The study also examined the role of renewable energy and financial development

• The study employed quantile-based methods for the period 1990 to 2019 for the United States

• Economic policy uncertainty, and renewable energy promote ecological quality

• Oil price uncertainty lessen ecological quality

Graphical abstract

KEYWORDS:

• Carbon neutrality
• oil price uncertainty
• renewable energy
• economic policy uncertainty
• financial development

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data is readily available on request from the corresponding author.