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Paper short abstract

Climate policy uncertainty reshapes how clean energy markets respond to oil price volatility in developing economies. Clean energy assets show resilience under uncertainty, with institutional quality mediating outcomes, highlighting the role of credible climate policy in energy transitions.

Paper long abstract

Climate policy uncertainty (CPU) is an increasingly important but underexplored factor shaping energy transitions in developing economies. While credible climate policies are essential for attracting renewable energy investment, many fossil-fuel-dependent countries face regulatory instability, volatile energy markets, and weak institutions. This paper examines how climate policy uncertainty influences the response of clean energy markets to oil price volatility in developing-country contexts.

Using clean energy index returns, global oil price data, and established CPU indicators, the study employs an autoregressive distributed lag (ARDL) framework with dynamic extensions to capture short- and long-run interactions. The findings show that climate policy uncertainty weakens the transmission of oil price volatility to clean energy markets, suggesting a partial decoupling from fossil fuel dynamics. Clean energy assets also exhibit resilience during periods of heightened uncertainty, indicating their potential role as hedging instruments. Importantly, institutional quality conditions these effects, highlighting the role of governance in shaping energy transition outcomes.

By providing evidence from underrepresented developing economies, the paper contributes to debates on energy transitions, climate governance, and development under uncertainty. The results underscore the need for predictable and credible climate policies to ensure that energy transitions support inclusive and sustainable development pathways.