Do markets Trump politics? Fossil and renewable market reactions to major political events

Abstract

AbstractWe investigate the effects of three events with major importance for climate policy on energy sector stocks: the Paris Agreement, the Trump election and presidency, and the Biden election. By combining event studies with impulse‐indicator saturation methods, we show that the Paris Agreement and the election of Mr. Biden benefited renewable industries, while the election of Mr. Trump had negative effects. For fossil fuel industries, the effects were largely the opposite. Despite Trump's efforts to eliminate environmental regulations, his presidency did however witness a decrease in both US coal production and consumption, while natural gas and oil consumption increased.