Understanding how climate preferences, environmental policy stringency, and energy policy uncertainty shape renewable energy investments in Germany

Germany, as one of the largest carbon emitters in the world, faces a crucial challenge in meeting SDG 7, which underscores the importance of affordable and clean energy. To achieve sustainability and combat climate change, it is imperative for Germany to devise innovative policies aimed at enhancing the accessibility and cleanliness of energy sources. Therefore, this study examines how climate preference, environmental policy stringency, and energy policy uncertainty affect renewable energy investments. We used a unique bootstrap rolling window causality technique to examine sectoral quarterly data from 2004 to 2021. The results from the parameter instability tests indicate that none of the estimated models exhibit constant parameters. The bootstrap rolling window causality analysis reveals that climate preference and environmental policy stringency significantly and positively impact biomass and solar energy investments, while having no influence on wind energy investments. Meanwhile, energy policy uncertainty negatively affects biomass and solar energy investments, with no impact on wind energy investments. The study provides policymakers with practical insights to help them make insightful decisions and accomplish strategic actions to encourage renewable energy investments and a sustainable future.