Climate Policy Uncertainty and the Demand for Renewable Energy in the United States of America: Evidence from a Non-Linear Threshold Autoregressive Model

This study examines the relationship between climate policy uncertainty and the demand for renewable energy in the United States. The primary findings suggest that there is a nonlinear threshold effect resulting from climate policy uncertainty, as measured by the Climate Policy Uncertainty Index (CPU) and the Environmental Policy Uncertainty Index (ENVPU), on renewable energy demand (REC). The findings indicate a negative relationship between the CPU and the REC when the CPU is beyond a specific threshold. This suggests that economic agents adopt a cautious approach, sometimes referred to as the “wait and see” policy, in their renewable energy allocation. In essence, customers may opt to reduce their utilization of renewable energy in favor of alternate sources as a means to circumvent the investment risks associated with renewable alternatives.