Germany’s energy security strategy in times of turmoil: The role of AI-driven energy systems and environmental policy in the Russian gas exit

Abstract

The 2014 Crimea crisis and the 2022 Russia’s all-out war against Ukraine sent shockwaves across Europe and uncovered the continent's reliance on a key geopolitical adversary. Energy has become a central issue in this situation. European nations have committed to reducing their dependence on Russian fossil fuels. Meanwhile, Russia has restricted gas supplies to some countries and substantially decreased deliveries to others, and Germany found itself in the driver’s seat. This study explores the role of AI-driven energy systems and environmental policy (EPS) in shaping Germany’s response to Russian gas dependency in shifting geopolitical landscape (GPR). Using a battery of robust econometric methods, the findings reveal that AI and EPS significantly reduce Germany’s dependency on Russian gas in both the short and long run, with stronger effects observed over the long term. Geopolitical risk, although having limited direct effects, but its interaction with AI and EPS highlights the compounded benefits of integrated technological advancement and policy strategies in mitigating energy dependency in times of turmoil. Moreover, the interaction between AI, EPS, and the 2014 Crimea crisis (D₂₀₁₄) demonstrated that this crisis acted as a catalyst, accelerating structural changes in Germany's energy policies and diversification efforts. To test robustness, this study uses the 2014 Crimea crisis as an exogenous shock. The Synthetic Control Method (SCM) reveals a significant gap between actual and synthetic Germany’s gas imports, highlighting Germany’s efforts to address energy dependency through AI-driven energy management and policy measures. Policymakers should integrate AI technologies with targeted energy policies to enhance energy resilience and reduce dependency on geopolitical adversaries during times of crisis.