Geopolitical risk and energy transition in Russia: Evidence from ardl bounds testing method

Abstract

© 2020 by the authors. One of the current debatable global problems is climate change or global warming as crucial geopolitical risks. The progress of energy transition by considering geopolitical risk has not been considered seriously yet. This paper contributes to the literature by modeling and analyzing energy transition patterns in Russia with emphasis on geopolitical risks factor as a giant fossil fuels producer using the ARDL bounds testing method over the period of 1993-2018. The main results proved long-run negative impact of economic growth, population growth and inflation rate on energy transition of Russia, while CO2 emissions, geopolitical risk, exchange rate and financial openness have positive impacts on energy transition movement in the country. Furthermore, we found out that in the short-run, the relationship between energy transition improvement and economic growth, CO2 emissions, population growth and inflation rate is negative, while geopolitical risk, exchange rate and financial openness are the only variables which accelerate energy transition in the country. As major concluding remarks, Russia's policy makers should draw attention to the long-run energy plans in the country. Furthermore, lowering dependency of Federals' budget to the oil and gas revenues would be a useful policy to reduce negative impact of economic growth on energy transition movement in the country. Another recommendation is to determine rapid decarbonizing policies in the country.