The purpose of conducting this study revolves around exploring risk related to energy and its association with environmental quality in China for the period between 1996 and 2021. This study also aims to analyze environment-related impacts or consequences of renewable energy resources, economic complexity (EC), globalization in finance and trade openness (TRO).
The paper examines the connection between energy risk and environmental quality using recently designed methods for quantile-on-quantile regression analysis and quantile-on-quantile Granger causality tests. These methods allow us to detect not only the effects of independent variables on the environment but also test causality between variables.
According to the conclusions derived from the empirical investigation, the rise in energy-related risk (ERR) reduces the load capacity factor (LCF) in all quantiles. Although the effect of ERR turns positive in times when environmental quality is very high, the ERR effect that diminishes environmental quality tends to prevail in other quantiles. In addition, EC, financial globalization and TRO negatively influence environmental quality in all quantiles.
In fact, this study offers new insights into the environmental impacts of ERR based on the LCF, which serves as an indicator reflecting ecological sustainability. The use of the quantile-on-quantile method shows that there are differences in these relationships. Indeed, based on the results obtained, increasing supportive policies for renewables and mitigating risks in the energy sector are crucial for improving environmental conditions in line with the carbon neutrality goal for 2060.
