How climate policy uncertainty might affect energy stock returns

The back-and-forth shift in climate policy between the Biden and Trump administrations has created uncertainty about future directions related to addressing climate change. A new study in International Studies of Economics has examined the impact of climate policy uncertainty on world energy stock returns.

The study found that a rise in climate policy uncertainty causes stocks to plummet in individual countries, regions, and the world energy stock markets, as investors perceive that climate policy uncertainty could damage economic activity and carbon costs that jeopardize their future performance. Investigators also found that a rise in oil prices has a negative effect on stock returns, except in the Gulf Cooperation Council region and Kuwait, which are oil exporting markets.

“The implications of this study can help investors and policymakers,” the authors wrote.