DP17207 The Russia-Ukraine War and Climate Policy Expectations: Evidence from the Stock Market
In response to the Russian-Ukraine war, stocks more exposed to the regulatory risks of the transition to a low-carbon economy performed better, suggesting that investors expect an overall slow-down of this transition. These stock price effects were particularly strong in the US. In Europe, the effects were less pronounced or even opposite, arguably because market participants expect stronger policy responses supporting renewable energy sources. These findings highlight an expected international divergence in the pace of the energy transition, with geopolitical tensions thus threatening the gains made so far in combating the global problem of climate change.