Dynamic responses of clean energy markets to trade uncertainties and partisan conflict: Evidence from a TVP-local projection framework

The study examines how Partisan Conflict (PC), World Trade Uncertainty (WTU), and Trade Policy Uncertainty (TPU) influence clean energy market (CEM) indices from 2010 M11-2024 M06 using Time-Varying Parameter Local Projection (TVP-LP). Analysing eleven sub-indices – BIO, SOLAR, WIND, and others – results show that these uncertainties vary significantly across energy sectors and macroeconomic conditions. During economic booms characterized by low global unemployment, some sectors – SMART GRID and ENERGY STORAGE – are sensitive to TPU and PC, while others – WIND and BIO – show delayed but persistent effects. Conversely, during uncertainty periods, negative impacts on investment are severe and enduring. These underscore that clean energy sector vulnerability depends on source and shocks timing, emphasizing tailored policies to promote resilience and investment under different economic regimes. The study offers a nuanced, disaggregated, and state-dependent framework for understanding how uncertainty propagates through CEM, with broader macro-financial, political, and energy policy implications.