From vulnerability to adaptation: Institutional, technological, and fiscal moderators of climate risk in renewable energy development

Abstract

Understanding how climate risk shapes the trajectory of renewable energy transitions is critical for global sustainability. While existing literature has largely treated climate change as an exogenous shock that undermines renewable energy systems, this study re-examines that premise by investigating whether climate risk can also act as conditional drivers of energy transition, depending on structural conditions. Using a country-level panel of 61 countries from 2000 to 2023, we employ fixed-effects models, quantile regressions, threshold regressions, and panel vector autoregression to assess the heterogeneous and dynamic effects of climate risk on renewable energy development. To mitigate endogeneity, the benchmark estimates are complemented by multiple instrumental-variable strategies, all of which yield negative and statistically significant coefficients on climate risk. The results show that climate risk generally inhibits renewable energy deployment, but the impact is highly asymmetric. The effects are more adverse at lower levels of renewable energy development, while higher levels show weaker adverse effects and adaptive responses in some cases. Threshold analyses further reveal that institutional quality, technological innovation, particularly AI-related advances, and public investment condition the direction and magnitude of climate risk effects. In supportive institutional, technological, and fiscal environments, climate risk can stimulate rather than hinder renewable energy development. By highlighting the conditional nature of climate and energy interactions, this study underscores the importance of system resilience, policy design, and adaptive capacity in managing climate-induced challenges and advancing renewable energy transitions.

The authors' abstract, as published at the source. Renewable and Sustainable Energy Reviews, 2026 · DOI ↗