1. Introduction
Climate change has become one of the most pressing global challenges over the past decade. So far, many ecosystems are susceptible to climate change. Climate change not only has a direct impact on agricultural output, natural resources, human health and other socio-economic benefits, it also has an indirect impact on manufacturing, energy production, transportation and other economic activities, such as services [
1]. Previous studies of climate-related factors affecting the socio-economic behaviors usually depend on using a single indicator to reflect climate change. For instance, the change in temperature or the change in carbon emissions or duration of sunshine is widely used in related studies [
2,
3], which cannot fully capture the economic losses caused by climate risks. The climate risk index of different countries constructed by the Germanwatch can well describe the extent of losses due to extreme climate events (floods, droughts, tornados, hurricanes, etc.). This provides data support for this study to test the relationship between extreme climate risks and energy consumption transition.
Since the burning of fossil fuels releases a large amount of greenhouse gases (GHGs) into the environment, especially carbon dioxide, which causes severe environmental problems, the transition of energy consumption has become an important way to reduce environmental pollution and carbon dioxide emissions. In this regard, the Kyoto Protocol, signed in 1997, established greenhouse-gas-emission targets, and the fundamental purpose of this agreement was to reduce GHGs worldwide. At the 21st United Nations Climate Change Conference held in Paris in 2015, the first global emission reduction agreement covering nearly 200 countries and regions was reached, namely, the Paris Agreement, marking a historic and important step in the global response to climate change. After signing the Kyoto Protocol, in order to achieve the goal of reducing carbon emissions, countries began to adopt more renewable energy to promote energy consumption transition. After years of theoretical exploration and practice from all walks of life, the use of renewable energy is considered to be the main applicable solution to deal with climate change and alleviate global warming. Only through the energy consumption transition can the difficulties of tackling climate change be overcome. Gielen et al. [
4] have pointed out that two-thirds of the world’s total energy demand would be met by renewable energy by 2050, which might significantly reduce greenhouse gas emissions. However, affected by economic development needs, energy supply and government governance, the progress of energy consumption transition in different countries is not the same [
5,
6], and the quantitative risks of climate change factors on energy consumption transition are rarely considered. Therefore, this paper takes climate risks as the main factor to test their impact on energy consumption transition and their heterogeneous impacts across different countries.
The motivation for the transition of energy consumption has aroused widespread concern in the socio-economic field. First, on the demand side, economic development, urbanization and industrialization are the main causes of energy consumption transition [
7,
8,
9,
10,
11,
12]. Second, on the supply side, energy-supply constraints affect energy consumption transition behavior [
13]. In addition, trade has become an important factor in energy consumption transition by influencing energy supply [
14,
15], and low-cost renewable power supply is the key driving force of energy consumption transition. Third, fluctuations in international energy prices and unexpected external shocks worldwide, such as the financial crisis, also affect the energy consumption transition process.
The impact of climate risks has gradually become a research issue of concern in various fields. First, the influential effect of climate change on economic outputs has been extensively analyzed. From a macroeconomic perspective, economic losses caused by severe weather conditions have been quantified and analyzed [
16,
17,
18,
19]. From a microeconomic perspective, it has been confirmed that corporate performance is significantly affected by climate risks, which can reduce the economic efficiency of corporate assets and earnings management to a large extent [
20,
21] and increase the possibility of corporate debt defaults [
22]. Second, the energy consumption structure affected by climate risks has attracted increasing attention from governments and academic world. The impacts of climate change on research and the development of energy technologies [
23], energy transition preferences [
24] and global energy consumption [
6] have been analyzed. In addition, there are some studies that introduce climate change into energy economic systems [
25,
26]. Third, in recent years, climate risks have become a focus in the financial field. Climate change has become a component of financial risks [
27], which in turn affects the stability of the financial system [
28,
29,
30], thereby affecting energy efficiency [
31].
Therefore, the panel data of 101 countries or regions from 2006 to 2019 is used to analyze the heterogeneous impacts of extreme climate risks on the global consumption transition in our study. This study makes contributions to the existing research from the following aspects.
First, cross-country evidence on the impact of extreme climate risks on energy consumption transition is presented in our study, enriching the research on climate risks as external incentives for energy structure transition. The existing literature on energy consumption transition mainly focuses on the driving factors of energy supply and demand, such as funding growth, urbanization and industrialization. However, one of the external factors influencing energy consumption transition is discussed and analyzed, that is extreme climate risks. Although climate risks have received great attention from international organizations and governments worldwide, most studies mainly use climate risks as the research background for qualitative analysis due to the limitation of historical data [
6,
23]. Changes in external incentives such as extreme weather risks may cause changes in countries’ energy consumption transition behaviors.
Second, the role of government governance in regulating the relationship between climate risk and energy consumption transition has been analyzed. The empirical results show that the higher the country’s governance quality, the more conducive it is to promote renewable energy consumption and energy consumption transition. The possible reason is that governments with high levels of governance can promptly introduce measures to compensate for the negative impact of climate risks on energy consumption transition.
Third, our study helps analyze international differences in the impact of climate risks on energy consumption transition as well as the heterogeneous effects when affected by external shocks, proposing corresponding countermeasures. The results show that countries with abundant energy resources are more conducive to the development of renewable energy due to short-term climate risks; countries with insufficient energy resources are affected by long-term climate risks, and energy consumption transition behavior is stronger. An interesting conclusion is that the transition of energy consumption is more significantly affected by climate risks in countries with lower levels of economic development. In addition, economic recession and falling oil prices play important roles in affecting the relationship between climate risks and energy consumption transition. These conclusions are conducive to exploring differentiated policy recommendations.
The rest of this paper is organized as follows.
Section 2 reviews relevant literature and proposes hypotheses.
Section 3 focuses on the model specification and data sources.
Section 4 interprets and discusses the empirical results, including the main results and heterogeneous effects with other tests. Conclusions and policy implications are summarized in
Section 5.
5. Conclusions
To address the risks induced by extreme climate events, such as floods, heat waves, and long-term droughts, countries, regions and international organizations are paying increasing attention to energy consumption behavior. Under unfavorable weather, the cost of traditional fossil energy consumption has risen, further aggravating the frequency of extreme weather events. There is little literature that conducts empirical analysis on the relationship between climate risks and energy consumption transition. Therefore, the annual country-level data of 101 countries from 2006 to 2019 are sorted and used to study the impact of extreme climate risks on the transition of energy consumption in our study, and the following conclusions are drawn: First, countries faced with higher climate risks are more likely to develop renewable energy sources for energy consumption transition, especially those countries faced with long-term extreme climate risks. Second, levels of national governance quality can weaken the promotion effect of climate risks on the transition of energy consumption. Third, the results of heterogeneity tests show that the relationship between climate risks and energy consumption transition is more significant in countries with rich resources and low levels of economic development. In addition, the relationship between climate risks and energy consumption transition is more significant when affected by economic recession and falling oil price fluctuations. We use the instrumental variable method to deal with potential endogenous problems, further confirming that our findings are robust.
Our study provides first-hand evidence for proposing policies to address climate change and energy transition. First of all, the formulation of energy policies must balance the relationship between economic development and the outcomes of climate change. Especially under the influence of extreme climate risks, the promotion of renewable energy consumption should be accelerated. Second of all, improving national governance quality can alleviate the negative impact of climate risks on energy consumption. This requires governments of all countries to actively participate in global climate risk management and jointly promote the transition of energy consumption. Additionally, global cooperation should be strengthened. Countries with rich resources and high levels of economic development make full use of their own advantages to cooperate with developing countries in promoting energy consumption transition, jointly promoting the research, development and use of renewable energy. Only in this way can all countries jointly deal with the shocks from economic cycles and oil price fluctuations to promote the energy consumption transition.