Dynamic policy pathfinding for balanced growth of energy trilemma: Evidence from the world's large energy-consuming economies

Abstract

The balance scales of energy trilemma dimensions e.g., energy equity, energy security, and environmental sustainability, are changing, requiring a regime-switching with time-varying transition path forward. Accordingly, this research first studies how the trade-offs between energy trilemma dimensions are formed through different regimes in the twenty-five large energy consumers during 2004–2021. Then, the time-varying transition of the switching states in response to the hydrogen economy and geopolitical risks is investigated. To that end, a Markov-switching panel vector autoregressive method with time-varying transition is applied. Finally, this research assesses the performance of energy trilemma in response to a change in the pivotal policy instruments, using the generalized method of moments estimator. The regime-switching impulse-response analysis supports the short-term trade-offs between the dimensions under two regimes. Further, the development of the hydrogen economy increases the p-value of remaining in regime 1 as the dominant regime with the trade-offs; “upward”, “downward”, and “upward” states for the dimensions respectively, while the escalation of geopolitical risks declines the transition probability from regime 2 into regime 1. Finally, the existence of a causal and long-term relationship between energy trilemma and the policy instruments is assessed through the generalized method of moments. The policymakers should present the role of green transition, complexity, and geostrategy policies on nonlinear trade-offs between the dimensions is crucial for ensuring energy equity, maintaining energy security, and accelerating environmental sustainability and hence, a regime-switching balanced growth of energy trilemma. This vital structure is essential for inclusive, orderly, and just energy transition.