Does Geopolitical Risk Induce Comparative Advantage in Low-Carbon Energy Trade? Insights on Climate Policy and Innovation Business Strategies

Publication Name: Business Strategy and the Environment

Publication Date: 2026-01-01

Volume: Unknown

Issue: Unknown

Page Range: Unknown

Description:

Given the significant surge in greenhouse gas emissions over the past several decades, the demand for low-carbon energy products has increased globally. However, geopolitical risks and tensions have also been escalating, which can reshape the trade of low-carbon energy products. Despite growing work on geopolitical risk and energy transition, no study has yet examined how geopolitical tensions reshape countries' revealed comparative advantage in low-carbon energy trade. This study therefore aims to fill this research gap by providing an understanding of how geopolitical risk affects comparative advantage in low-carbon energy trade across 27 countries worldwide. Taking the data period from 2000 to 2021, the study implements several panel regression models to account for endogeneity as well as cross-country heterogeneity. The results reveal that geopolitical risk undermines a country's comparative advantage in international trade of low-carbon energy products, regardless of the model specification. Domestically adopted low-carbon energy innovation suggests a positive outcome for enhancing comparative advantage in this category, while low-carbon energy policy has no significant impact. These results imply that governments and firms aiming to build durable comparative advantage in low-carbon energy trade should complement innovation-support policies with strategies that reduce exposure to geopolitical disruptions in green value chains.

Open Access: Yes

DOI: 10.1002/bse.70587

Authors - 5