The effect of geopolitical risks from the Russian Federation and the Middle East on carbon and energy inequalities in Europe

Abstract

Background

Since the beginning of the twenty-first century, geopolitical events have had a significant impact on global energy markets, particularly on oil prices. The Russian Federation and Middle Eastern countries are major energy producers, and when tensions rise in these regions, it has a worldwide impact on energy systems. European countries are heavily reliant on energy imports from these regions, making them particularly vulnerable to geopolitical risks. The study poses a key question: do geopolitical risks not only disrupt energy markets, but also exacerbate energy and carbon inequalities between countries? There are significant differences in energy access and carbon emissions across European nations, alongside ongoing political tensions involving the Russian Federation and the Middle East. This combination forms the foundation of our research. We employed statistical models known as Mean Group and Pooled Mean Group, utilizing an Auto Regressive Distributed Lag framework, to analyze the impact of political risks on these two forms of inequality. Our analysis covers 30 years of data, from 1993 to 2022, allowing us to capture major political events and see how they impact Europe’s energy situation.

Results

Geopolitical risks from the Russian Federation and the Middle East have a stronger influence on energy and carbon inequalities than global geopolitical risks. Furthermore, geopolitical threats—capturing risk-related tensions such as war, military buildup, and nuclear risks—have a stronger and more persistent impact on European energy inequality than geopolitical acts, which reflect realized events such as conflicts and terrorism. The consumption of renewable energy has been shown to have different effects over time: it helps to reduce energy inequality in the short term, but contributes to increased inequality in the long term. Carbon and energy inequality respond in a similar way to the research variables.

Conclusions

While renewable energy consumption has been shown to reduce inequality in the short term, disparities in infrastructure across European countries have been identified as a key driver of long-term inequality. Consequently, European countries should expand the development of renewable energy as a short-term geopolitical risk mitigation strategy while simultaneously investing in infrastructure harmonization.