How does climate policy uncertainty affect energy stock returns?

The back-and-forth shift in climate policy between the Biden and Trump administrations has created uncertainty about future directions related to addressing climate change. A new study in International Studies of Economics examined the impact of climate policy uncertainty on world energy stock returns.

The study found that a rise in climate policy uncertainty causes stocks to plummet in individual countries, regions, and the world energy stock markets, as investors perceive that climate policy uncertainty could damage economic activity and carbon costs that jeopardize their future performance. Investigators also found that a rise in oil price has a negative effect on stock returns, except in the Gulf Cooperation Council region and Kuwait, which are oil exporting markets.

“The implications of this study can help investors and policy makers,” the authors wrote.

URL upon publication: https://onlinelibrary.wiley.com/doi/10.1002/ise3.70003

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About the Journal
International Studies of Economics, formerly known as Frontiers of Economics in China, is a general interest open access journal in economics. The journal is double anonymized, peer-reviewed, and edited by the Institute for Advanced Research, Shanghai University of Finance and Economics. We welcome theoretical and empirical papers from all fields of economics, with an emphasis on the Chinese economy and other emerging, developing, or transition economies. We’re a platform to help communications between scholars in China and the rest of the world.

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