This paper develops the Energy Policy Uncertainty Index (ENPUI), a news-based measure of regulatory instability in Spain’s energy sector from 1997 to 2022. By systematically capturing policy reversals, tax reforms, and market interventions, ENPUI traces how regulatory shocks affect financial markets. Applying panel quantile regression to energy firms' equity and electricity futures data, we find asymmetric effects that depend on the volatility regime: uncertainty depresses returns in bearish conditions, especially in electricity futures markets, while amplifying volatility under specific regimes. Results highlight the financial costs of policy instability and provide insights for designing credible, climate-consistent policies that foster investment and support the energy transition.
Juan Ignacio Peña (Wed,) studied this question.