Energy uncertainty and renewable energy consumption: evidence from global firms

Abstract

The purpose of this study is to examine the impact of energy uncertainty on renewable energy consumption in firms across 25 countries. Firm-level data are collected from LSEG for 25 countries from 2010 to 2022. This study uses ordinary least squares with industry and year fixed effects to examine the impact of energy uncertainty on renewable energy consumption. The findings of this study demonstrate that energy uncertainty has a positive impact on a firm’s renewable energy consumption, and this relationship differs for oil-exporting and oil-importing countries, countries with low and high energy diversification and for emerging and developed countries. A series of robustness tests is also conducted, which align with the main results. This study highlights the increasing energy uncertainty in the global scenario because of different socio-economic, climatic and geopolitical uncertainties, highlighting the importance of the transition to renewable energy sources for firms. The authors could have studied the asymmetrical impact of energy uncertainty on the firm’s renewable energy consumption. This study highlights the heightened need for firms to transition to renewable energy sources amidst rising energy uncertainty, climate uncertainty, trade tensions and geopolitical uncertainty. Studies mostly focus on the impact of energy uncertainty on country-level renewable energy; this study focuses on the increasing need of firms to transition to renewable energy in the presence of energy uncertainty.