Geopolitical risk and environmental footprints: Exploring the moderating roles of AI and energy transition

Abstract

The intersection of geopolitical instability and environmental degradation presents substantial challenges for sustainable development. While existing literature primarily focuses on the direct effects of geopolitical instability on environmental degradation, it often overlooks the mitigating potential of technological advancements and structural changes. This study explores the crucial roles of artificial intelligence (AI) and energy transition (ET) in diminishing the environmental impacts exacerbated by geopolitical risk (GPR). Using advanced econometric models, this research analyzes data from 33 countries to elucidate the complex dynamics involved. The findings show that (1) There is always a facilitating relationship between GPR and environmental degradation, and when the environmental degradation quantile is high, the facilitating relationship decreases with the increase of the quantile. (2) Both AI and the ET have negative moderating effects on the relationship between GPR and environmental degradation. (3) There is a single threshold effect for both AI and ET, and the effect of the GPR index on per capita ecological footprint (EF) turns from positive to negative as AI increases. When ET is the threshold variable, GPR has an effect on the EF only at higher levels of the ET, and it has a dampening effect. Targeted policy recommendations will be provided in response to these findings.