Unveiling the impact of geopolitical risk, climate policy uncertainty, environmental policy stringency, and financial efficiency on renewable energy investment in the USA: Evidence from novel dynamic simulated ARDL approach

Fossil fuel energy consumption not only leads to climate change but also contributes to energy poverty and the unequal distribution of its supply, urging investment in alternative and clean energy sources. Furthermore, unprecedented geopolitical risk and climate policy uncertainty pose serious concerns for a steady energy supply, and the literature provides insufficient evidence for these important indicators, particularly considering the amount of renewable energy investment in the USA. The current paper formulates an interesting framework to scrutinize the impact of geopolitical risk, climate policy uncertainty, environmental policy stringency, and financial institutions' efficiency on renewable energy investment in the USA. For empirical analysis, this study utilizes modern econometric approaches such as the recently developed novel dynamic simulated ARDL and the frequency domain causality approach, harnessing the annual time series data spanning from 1990 to 2022. The obtained results explain that geopolitical risk negatively affects renewable energy investment, suggesting that higher geopolitical risk hinders renewable energy investment. Contrary to this, climate policy uncertainty, environmental policy, financial integration, and financial institutions' efficiency have a significant positive impact on renewable energy investment. In addition, the frequency domain causality test provides evidence of long, medium, and short-term causal connections between variables. The robustness analysis corroborates the main findings. Based on these results, the USA should promote renewable energy initiatives to mitigate geopolitical concerns among investors. Furthermore, the financial framework should support sustainability by directing energy investments in the capital market, encouraging long-term financial funding for energy projects, and incentivizing renewable energy investments.