Uncertainty and diversification: Analyzing the impact of energy-related and climate policy uncertainties on environmental degradation in the United States

This study examines the complex relationship between environmental degradation, energy-related uncertainty (EUI), climate policy uncertainty (CPU), and energy consumption diversification (ECD) in the United States from January 2001 to September 2022. Employing novel and robust econometric methods, including the Bootstrap ARDL Bounds test with smooth and sharp structural breaks, the Toda-Yamamoto causality test with a Fourier function, and partial wavelet coherency analysis, the study reveals a surprising negative relationship between both EUI and CPU with CO2 emissions which suggests that uncertainties surrounding energy and climate policies may incentivize actors to adopt cleaner technologies and prioritize emission reduction strategies. However, the study also identifies a positive relationship between ECD and CO2 emissions, highlighting the need for strategic diversification prioritizing renewable and low-carbon sources. These findings emphasize the critical role of clear, consistent, and sustained climate policies in fostering clean energy investment and mitigating environmental degradation.