Renewable energy and energy-related uncertainty in the voluntary provision of global public goods

Renewable energy has been promoted globally to mitigate climate change, yet its adoption is often hindered by the free-rider problem inherent in the voluntary provision of global public goods. This paper investigates whether the promotion of renewable energy provides a national-level benefit by functioning as a buffer against energy-related uncertainty. Utilizing a state-dependent model and local projections for a panel of 28 countries from 2000 to 2022, we analyze the dynamic response of the Energy-related Uncertainty Index (EUI) to its own unpredictable shocks. Our empirical results demonstrate that a high share of renewable energy in total final energy consumption effectively offsets fluctuations in energy-related uncertainty. Specifically, in a high renewable energy share regime, the impact of an EUI shock is significantly moderated 1–2 months after the initial disturbance compared to a low-share regime. These findings provide a novel economic rationale for national policy interventions by showing that the stabilizing effects of renewable energy accrue as a private benefit to the domestic economy rather than a purely global, non-excludable gain. By acting as an internal mitigating factor against energy-market shocks, renewable energy use shifts the incentive structure from global altruism to national risk management, offering a practical pathway for countries to accelerate the attainment of Target 7.2 of the Sustainable Development Goals (SDGs).