Climate risk and renewable energy technological innovation: An institutional environment perspective

Abstract

To explore whether climate risk (CR) affects renewable energy technological innovation (RETI) and its boundary conditions, this study examines the relationship between CR and RETI as moderated by institutional environment. Based on panel data of 60 countries for the period 2000–2019, we show that CR is not conducive to RETI, and that its negative marginal impact shows an inverted U‐shaped trend with the improvement of RETI. Heterogeneity analysis shows that floods and storms have the greatest negative impacts on RETI, and that innovations in solar and wind energy technologies are more vulnerable to the adverse shocks of CR. Furthermore, CR has a greater adverse effect on RETI in developing countries than in developed countries. However, the institutional environment, especially the economic institutional environment, can work to mitigate the negative effect of CR on RETI. Our findings not only enrich the research on the economic consequences of CR but also provide effective ways to mitigate the adverse impact of CR on RETI from the perspective of institutional environment.