The consequences of the energy transition: Evidence from North America, Europe, and China

Climate change necessitates action by countries to mitigate its negative effects. However, the energy transition-the primary policy aimed at combating it-can also yield unintended consequences. In an interconnected global economy, policies and changes in one country can have reverberations in other regions. Empirical studies have validated this point in economic contexts. This paper tests this argument in the context of the energy transition. This paper examines the impact of the energy transition using a time-varying Global Vector Autoregressive (GVAR) model from January 2001 to December 2020, encompassing 38 countries. The econometric model simulates energy transitions in key regions and illustrates both economic and non-economic responses. The findings reveal that energy transitions in North America (NOR) and the Eurozone (EUR) positively influence energy transitions in Asia, Latin America, and Europe (excluding EUR members). The Chinese energy transition, on the other hand, initially has a negative impact that fades over time. From a policy perspective, greater trade integration and fiscal policies that promote renewable energy may amplify these spillover effects.