Do energy risks drive the renewable transition in the Asia-Pacific? Insights from the method of moments quantile regression

Paul, Arindam and Kumar Behera, Manash and Sahoo, Dukhabandhu and Mohapatra, Souryabrata (2025): Do energy risks drive the renewable transition in the Asia-Pacific? Insights from the method of moments quantile regression. Published in: Journal of the Asia Pacific Economy

Abstract

Energy risks in the post-COVID-19 era pose significant challenges for human civilisation, particularly in the Asia-Pacific region, which remains highly vulnerable to energy crises. Although renewable energy is widely regarded as a strategic response, empirical research examining the nexus between energy risks and the renewable energy transition in this region remains limited. This study addresses the gap by investigating the impacts of energy uncertainty and insecurity on renewable energy transition across nine Asia-Pacific economies from 1991-2021. Employing the method of moments quantile regression, the findings reveal that both energy risks accelerate the transition, with stronger effects observed at more advanced stages. Furthermore, GDP per capita and foreign direct investment facilitate the transition, while green innovation unexpectedly hinders progress, reflecting potential underinvestment in environmental technologies. Causality tests confirm a unidirectional relationship from energy transition to uncertainty. The results underscore the urgency of enhancing renewable infrastructure, storage capacity, and foreign investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Energy-related uncertainty; Energy insecurity; Energy transition; Method of moments quantile regression; Asia-Pacific
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources

References

Afonso, T. L., Marques, A. C., & Fuinhas, J. A. (2021). Does energy efficiency and trade openness matter for energy transition? Empirical evidence for countries in the Organization for Economic Co-operation and Development. Environment, Development and Sustainability, 23(9), 13569–13589. https://doi.org/10.1007/s10668-021-01228-z

Ahir, H., Bloom, N., & Furceri, D. (2022). The World Uncertainty Index (Working Paper No. 29763). National Bureau of Economic Research. https://doi.org/10.3386/w29763

Akpanke, T. A., Deka, A., Ozdeser, H., & Seraj, M. (2023). Does foreign direct investment promote renewable energy use? An insight from West African countries. Renewable Energy Focus, 44, 124–131. https://doi.org/10.1016/j.ref.2022.11.007

Aslam, N., Yang, W., Saeed, R., & Ullah, F. (2024). Energy transition as a solution for energy security risk: Empirical evidence from BRI countries. Energy, 290, 130090. https://doi.org/10.1016/j.energy.2023.130090

Azam, A. (2024). How Environmental Policy Stringency, Foreign Direct Investment, and Eco-Innovation Supplement the Energy Transition: New Evidence from NICs. Sustainability, 16(7), 3033. https://doi.org/10.3390/su16073033

Azam, M. (2020). Energy and economic growth in developing Asian economies. Journal of the Asia Pacific Economy, 25(3), 447–471. https://doi.org/10.1080/13547860.2019.1665328

Bhattarai, U., Maraseni, T., & Apan, A. (2022). Assay of renewable energy transition: A systematic literature review. Science of The Total Environment, 833, 155159. https://doi.org/10.1016/j.scitotenv.2022.155159

Bhutada, G. (2022, April 8). Visualizing the History of Energy Transitions. Visual Capitalist. https://www.visualcapitalist.com/visualizing-the-history-of-energy-transitions/

Bourcet, C. (2020). Empirical determinants of renewable energy deployment: A systematic literature review. Energy Economics, 85, 104563. https://doi.org/10.1016/j.eneco.2019.104563

Breusch, T. S., & Pagan, A. R. (1980). The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of Economic Studies, 47(1), 239–253. https://doi.org/10.2307/2297111

Canay, I. A. (2011). A simple approach to quantile regression for panel data. The Econometrics Journal, 14(3), 368–386. https://doi.org/10.1111/j.1368-423X.2011.00349.x

Chudik, A., & Pesaran, M. H. (2015). Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors. Journal of Econometrics, 188(2), 393–420. https://doi.org/10.1016/j.jeconom.2015.03.007

Dai, J., Farooq, U., & Alam, M. M. (2025). Navigating energy policy uncertainty: Effects on fossil fuel and renewable energy consumption in G7 economies. International Journal of Green Energy, 22(2), 239–252. https://doi.org/10.1080/15435075.2024.2413676

Dang, T. H.-N., Nguyen, C. P., Lee, G. S., Nguyen, B. Q., & Le, T. T. (2023). Measuring the energy-related uncertainty index. Energy Economics, 124, 106817. https://doi.org/10.1016/j.eneco.2023.106817

Dogan, E., Chishti, M. Z., Karimi Alavijeh, N., & Tzeremes, P. (2022). The roles of technology and Kyoto Protocol in energy transition towards COP26 targets: Evidence from the novel GMM-PVAR approach for G-7 countries. Technological Forecasting and Social Change, 181, 121756. https://doi.org/10.1016/j.techfore.2022.121756

Dong, W., Li, Y., Gao, P., & Sun, Y. (2023). Role of trade and green bond market in renewable energy deployment in Southeast Asia. Renewable Energy, 204, 313–319. https://doi.org/10.1016/j.renene.2023.01.022

Driscoll, J. C., & Kraay, A. C. (1998). Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data. The Review of Economics and Statistics, 80(4), 549–560. https://doi.org/10.1162/003465398557825

Dumitrescu, E.-I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450–1460. https://doi.org/10.1016/j.econmod.2012.02.014

Dutta, A., Bouri, E., Saeed, T., & Vo, X. V. (2020). Impact of energy sector volatility on clean energy assets. Energy, 212, 118657. https://doi.org/10.1016/j.energy.2020.118657

Energy Institute. (2024). Statistical Review of World Energy [Dataset]. https://www.energyinst.org/statistical-review/home

Evans, O. (2023). The investment dynamics in renewable energy transition in Africa: The asymmetric role of oil prices, economic growth and ICT. International Journal of Energy Sector Management, 18(2), 229–247. https://doi.org/10.1108/IJESM-03-2022-0002

Fabra, N., & Reguant, M. (2024). The energy transition: A balancing act. Resource and Energy Economics, 76, 101408. https://doi.org/10.1016/j.reseneeco.2023.101408

Gao, J., & Zhang, L. (2021). Does biomass energy consumption mitigate CO2 emissions? The role of economic growth and urbanization: evidence from developing Asia. Journal of the Asia Pacific Economy, 26(1), 96–115. https://doi.org/10.1080/13547860.2020.1717902

Giannuzzi, G. M., Mostova, V., Pisani, C., Tessitore, S., & Vaccaro, A. (2022). Enabling Technologies for Enhancing Power System Stability in the Presence of Converter-Interfaced Generators. Energies, 15(21), 8064. https://doi.org/10.3390/en15218064

Gillessen, B., Heinrichs, H., Hake, J.-F., & Allelein, H.-J. (2019). Energy security in context of transforming energy systems: A case study for natural gas transport in Germany. Energy Procedia, 158, 3339–3345. https://doi.org/10.1016/j.egypro.2019.01.966

Gökgöz, F., & Güvercin, M. T. (2018). Energy security and renewable energy efficiency in EU. Renewable and Sustainable Energy Reviews, 96, 226–239. https://doi.org/10.1016/j.rser.2018.07.046

Haas, C., Kempa, K., & Moslener, U. (2023). Dealing with deep uncertainty in the energy transition: What we can learn from the electricity and transportation sectors. Energy Policy, 179, 113632. https://doi.org/10.1016/j.enpol.2023.113632

Hassan, M., Kouzez, M., Lee, J.-Y., Msolli, B., & Rjiba, H. (2024). Does increasing environmental policy stringency enhance renewable energy consumption in OECD countries? Energy Economics, 129, 107198. https://doi.org/10.1016/j.eneco.2023.107198

Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251–1271. https://doi.org/10.2307/1913827

Hoechle, D. (2007). Robust Standard Errors for Panel Regressions with Cross-Sectional Dependence. The Stata Journal, 7(3), 281–312. https://doi.org/10.1177/1536867X0700700301

Hossain, B. (2024). Do government spending on pollution abatement and targeted environmental policies promote green growth in Canada? Journal of Cleaner Production, 434, 140391. https://doi.org/10.1016/j.jclepro.2023.140391

Hossain, M. R., Dash, D. P., Das, N., Ullah, E., & Hossain, Md. E. (2024). Green energy transition in OECD region through the lens of economic complexity and environmental technology: A method of moments quantile regression perspective. Applied Energy, 365, 123235. https://doi.org/10.1016/j.apenergy.2024.123235

Hu, K., Sinha, A., Tan, Z., Shah, M. I., & Abbas, S. (2022). Achieving energy transition in OECD economies: Discovering the moderating roles of environmental governance. Renewable and Sustainable Energy Reviews, 168, 112808. https://doi.org/10.1016/j.rser.2022.112808

IEA. (2019, December 2). Energy Transitions Indicators: Tracking energy transitions. International Energy Agency. https://www.iea.org/articles/energy-transitions-indicators

Igeland, P., Schroeder, L., Yahya, M., Okhrin, Y., & Uddin, G. S. (2024). The energy transition: The behavior of renewable energy stock during the times of energy security uncertainty. Renewable Energy, 221, 119746. https://doi.org/10.1016/j.renene.2023.119746

Irfan, M., Rehman, M. A., Razzaq, A., & Hao, Y. (2023). What derives renewable energy transition in G-7 and E-7 countries? The role of financial development and mineral markets. Energy Economics, 121, 106661. https://doi.org/10.1016/j.eneco.2023.106661

Koenker, R. (2004). Quantile regression for longitudinal data. Journal of Multivariate Analysis, 91(1), 74–89. https://doi.org/10.1016/j.jmva.2004.05.006

Koenker, R., & Bassett, G. (1978). Regression Quantiles. Econometrica, 46(1), 33–50. https://doi.org/10.2307/1913643

Krane, J. (2017). Climate change and fossil fuel: An examination of risks for the energy industry and producer states. MRS Energy & Sustainability, 4(1), 2. https://doi.org/10.1557/mre.2017.3

Kumar, S., Nagar, A. L., & Samanta, S. (2007). Indexing the Effectiveness of Tax Administration. Economic and Political Weekly, 42(50), 104–110. https://www.jstor.org/stable/40277058

Lan, X., Trans, P., & Thoning, K. W. (2024). Trends in globally-averaged CO2 determined from NOAA Global Monitoring Laboratory measurements (Version Nos. 2024–05). NOAA Earth System Research Laboratories. https://doi.org/10.15138/9N0H-ZH07

Li, L., Wen, J., Li, Y., & Mu, Z. (2025). Supply chain challenges and energy insecurity: The role of AI in facilitating renewable energy transition. Energy Economics, 144, 108378. https://doi.org/10.1016/j.eneco.2025.108378

Lin, K., Ghosh, S., Abbas, S., Shahbaz, M., Ferraz, D., & Doğan, B. (2024). Heterogenous impact of energy security and environmental regulations on energy transition: Exploring the disparity between high-income and middle-income countries. Renewable Energy, 237, 121610. https://doi.org/10.1016/j.renene.2024.121610

Lin, Y., Mahmood, M. A., Meng, W., & Ali, Q. (2024). Green economy transition in Asia Pacific: A holistic assessment of renewable energy production. Journal of Cleaner Production, 437, 140648. https://doi.org/10.1016/j.jclepro.2024.140648

Long, A., Mokhtar, M. B., Ahmed, M. F., & Lim, C. K. (2022). Enhancing sustainable development via low carbon energy transition approaches. Journal of Cleaner Production, 379, 134678. https://doi.org/10.1016/j.jclepro.2022.134678

Ma, Y., Feng, G.-F., & Chang, C.-P. (2025). The impact of energy security on energy innovation: A non-linear analysis. Applied Economics, 57(16), 1867–1887. https://doi.org/10.1080/00036846.2024.2317810

Machado, J. A. F., & Santos Silva, J. M. C. (2019). Quantiles via moments. Journal of Econometrics, 213(1), 145–173. https://doi.org/10.1016/j.jeconom.2019.04.009

Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77–91. https://doi.org/10.2307/2975974

Marques, A. C., Fuinhas, J. A., & Pires Manso, J. R. (2010). Motivations driving renewable energy in European countries: A panel data approach. Energy Policy, 38(11), 6877–6885. https://doi.org/10.1016/j.enpol.2010.07.003

Nguyen, H. H., Van Nguyen, P., & Ngo, V. M. (2024). Energy security and the shift to renewable resources: The case of Russia-Ukraine war. The Extractive Industries and Society, 17, 101442. https://doi.org/10.1016/j.exis.2024.101442

Our World in Data. (2024). Global primary energy consumption by source. https://ourworldindata.org/grapher/global-energy-consumption-source

Parks, R. W. (1967). Efficient Estimation of a System of Regression Equations when Disturbances are Both Serially and Contemporaneously Correlated. Journal of the American Statistical Association, 62(318), 500–509. https://doi.org/10.1080/01621459.1967.10482923

Pata, U. K., & Pata, S. K. (2025). Unveiling the role of energy policy uncertainty, energy transition and climate policy uncertainty on renewable energy minerals in China. Environment, Development and Sustainability. https://doi.org/10.1007/s10668-025-06343-9

Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20(3), 597–625. https://doi.org/10.1017/S0266466604203073

Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22(2), 265–312. https://doi.org/10.1002/jae.951

Pesaran, M. H. (2021). General diagnostic tests for cross-sectional dependence in panels. Empirical Economics, 60(1), 13–50. https://doi.org/10.1007/s00181-020-01875-7

Pesaran, M. H., Ullah, A., & Yamagata, T. (2008). A bias‐adjusted LM test of error cross‐section independence. The Econometrics Journal, 11(1), 105–127. https://doi.org/10.1111/j.1368-423X.2007.00227.x

Phillips, P. C. B., & Hansen, B. E. (1990). Statistical Inference in Instrumental Variables Regression with I(1) Processes. The Review of Economic Studies, 57(1), 99–125. https://doi.org/10.2307/2297545

Ram, M., Aghahosseini, A., & Breyer, C. (2020). Job creation during the global energy transition towards 100% renewable power system by 2050. Technological Forecasting and Social Change, 151, 119682. https://doi.org/10.1016/j.techfore.2019.06.008

Riaz, A., Ullah, Z., & Hashmi, S. H. (2025). A temporal exploration of resilience of renewable energy consumption to the energy-related uncertainty shocks in the US. Journal of Cleaner Production, 493, 144946. https://doi.org/10.1016/j.jclepro.2025.144946

Saadaoui, H., & Chtourou, N. (2023). Do Institutional Quality, Financial Development, and Economic Growth Improve Renewable Energy Transition? Some Evidence from Tunisia. Journal of the Knowledge Economy, 14(3), 2927–2958. https://doi.org/10.1007/s13132-022-00999-8

Salahuddin, M., Gow, J., & Vink, N. (2020). Effects of environmental quality on agricultural productivity in sub Saharan African countries: A second generation panel based empirical assessment. Science of The Total Environment, 741, 140520. https://doi.org/10.1016/j.scitotenv.2020.140520

Samadi, S., Fischer, A., & Lechtenböhmer, S. (2023). The renewables pull effect: How regional differences in renewable energy costs could influence where industrial production is located in the future. Energy Research & Social Science, 104, 103257. https://doi.org/10.1016/j.erss.2023.103257

Shahbaz, M., Wang, J., Dong, K., & Zhao, J. (2022). The impact of digital economy on energy transition across the globe: The mediating role of government governance. Renewable and Sustainable Energy Reviews, 166, 112620. https://doi.org/10.1016/j.rser.2022.112620

Singh, H. V., Bocca, R., Gomez, P., Dahlke, S., & Bazilian, M. (2019). The energy transitions index: An analytic framework for understanding the evolving global energy system. Energy Strategy Reviews, 26, 100382. https://doi.org/10.1016/j.esr.2019.100382

Smil, V. (2010). Energy Transitions: History, Requirements, Prospects. Bloomsbury Academic.

Solomon, B. D., & Krishna, K. (2011). The coming sustainable energy transition: History, strategies, and outlook. Energy Policy, 39(11), 7422–7431. https://doi.org/10.1016/j.enpol.2011.09.009

Su, C.-W., Wu, Y., & Qin, M. (2025). Preserving energy security: Can renewable energy withstand the energy-related uncertainty risk? Energy, 320, 135349. https://doi.org/10.1016/j.energy.2025.135349

Tian, J., Yu, L., Xue, R., Zhuang, S., & Shan, Y. (2022). Global low-carbon energy transition in the post-COVID-19 era. Applied Energy, 307, 118205. https://doi.org/10.1016/j.apenergy.2021.118205

Tollefson, J. (2020). How Trump damaged science—And why it could take decades to recover. Nature, 586(7828), 190–194. https://doi.org/10.1038/d41586-020-02800-9

Topcu, M., & Tugcu, C. T. (2020). The impact of renewable energy consumption on income inequality: Evidence from developed countries. Renewable Energy, 151, 1134–1140. https://doi.org/10.1016/j.renene.2019.11.103

UNFPA. (2014, December 2). Population trends. Asia and the Pacific. https://asiapacific.unfpa.org/en/populationtrends

Wang, Q., & Zhang, F. (2021). Free trade and renewable energy: A cross-income levels empirical investigation using two trade openness measures. Renewable Energy, 168, 1027–1039. https://doi.org/10.1016/j.renene.2020.12.065

WEF. (2024). Fostering Effective Energy Transition 2024. World Economic Forum. https://www.weforum.org/publications/fostering-effective-energy-transition-2024/

Wei, Y.-M., Liang, Q.-M., Wu, G., & Liao, H. (2019). Effects of Clean and Renewable Energy on National Energy Security. In Energy Economics: Understanding Energy Security in China. Emerald Publishing Limited. https://doi.org/10.1108/978-1-83867-293-520191010

Westerlund, J. (2005). New Simple Tests for Panel Cointegration. Econometric Reviews, 24(3), 297–316. https://doi.org/10.1080/07474930500243019

Yan, Q., Wang, Y., Zhang, X., Du, X., & Huang, T. (2025). Energy import dependence, renewable energy deployment, and carbon emissions in G20 countries. Natural Resources Forum, 49(2), 1996–2024. https://doi.org/10.1111/1477-8947.12480

Zeng, Q., Hafeez, M., Sher, F., & Ullah, S. (2024). Environmental higher education, formal finance, energy security risk, and renewable energy investment in China: An aggregate and disaggregate analysis. Renewable Energy, 232, 121102. https://doi.org/10.1016/j.renene.2024.121102

Zhu, H., Guo, Y., You, W., & Xu, Y. (2016). The heterogeneity dependence between crude oil price changes and industry stock market returns in China: Evidence from a quantile regression approach. Energy Economics, 55, 30–41. https://doi.org/10.1016/j.eneco.2015.12.027

Zou, C., Zhao, Q., Zhang, G., & Xiong, B. (2016). Energy revolution: From a fossil energy era to a new energy era. Natural Gas Industry B, 3(1), 1–11. https://doi.org/10.1016/j.ngib.2016.02.001