Geopolitical and climate risks threaten financial stability and energy transitions

Abstract

We propose a framework to unravel the hurdles and opportunities for the renewable energy transition in contemporary crises to examine the interconnections between energy transition, climate risks, and geopolitical issues. The study focuses on Germany and emphasizes that neglecting climate-related risks leads to financial instability and hampers the energy transition. If Parisaligned energy and financial policies are not in place, further cascade (negative) effects on energy transitions may occur. Uncertainty and instability caused by geopolitical crises intensify negative feedback loops. Climate mitigation is thus critical because climate concerns affect financial stability and the orderly path of energy transitions.