Geopolitical Risk and National Green Economic Efficiency: Evidence from G20 Member Countries

This study investigates how geopolitical risk shaped the green economic efficiency (GEE) of 19 countries in the G20 group from 2000 to 2022. Using the Super-SBM model, we construct a cross-country measure of GEE and empirically examine both its determinants and underlying mechanisms. The results show that rising geopolitical risk significantly undermines GEE, indicating that external uncertainty disrupts countries’ ability to balance economic growth with environmental performance. Mechanism analysis reveals that geopolitical tensions heighten energy security concerns, leading to increased fossil fuel consumption, and trigger exchange rate depreciation to decrease green economic efficiency. Moreover, foreign direct investment mitigates the adverse effects of geopolitical risk by facilitating technology spillovers and capital inflows. Moreover, geopolitical risks have different impacts on the efficiency of a country’s green economy, varying across levels such as the country’s economic development level, resource endowment, and trade openness. The findings highlight geopolitical risk as a constraint on global green transition. Policymakers should strengthen energy source diversity, stabilize exchange rate environments, and promote FDI to enhance national resilience. Building institutional capacity is essential in sustaining green economic efficiency under rising geopolitical uncertainty.