Do Environmental Policy and Economic Policy Uncertainty Moderate Geopolitical Risk -Environment Nexus?

Abstract

Geopolitical risk is one of the most prominent global risks. The authors investigate the potential impact of geopolitical risk on carbon emissions across 20 countries from 1997 to 2023 by employing the Method of Moments Quantile Regression. We analyzed the unconditional and conditional role of environmental policy stringency and economic policy uncertainty on carbon emissions. Our analysis reveals that geopolitical risk significantly increases carbon emissions across all quartiles, including the 90^th quantile, confirming the escalating effect of geopolitical disruptions on carbon emissions. Furthermore, the adverse impact of geopolitical risk on carbon emissions becomes negligible with the implementation of stringent environmental policies. Moreover, the negative and significant moderating effect of economic policy uncertainty suggests that it promotes innovation and international cooperation, thereby mitigates carbon emissions. The findings underscore the importance of maintaining peaceful international relations, fostering technological collaboration, implementing counter-terrorism initiatives, and adhering to stringent environmental regulations to achieve ecological sustainability.