Does policy uncertainty stifle the green transition? A multiscale analysis of the energy–growth nexus in the United Kingdom

Abstract

This paper examines the impact of economic policy uncertainty (EPU) on the United Kingdom's economic growth via energy consumption channels, using monthly observations from 1998M1 to 2024M12. The analysis employs a Multivariate Wavelet Quantile Regression (MWQR) framework to capture nonlinear relationships, scale-dependent associations, and regime-dependent interactions among real GDP per capita (GDPPC), share of renewable energy (REN), and energy use per capita (ENUE). The contributions of this paper are threefold: first, it provides a multiscale assessment of the impact of EPU on both REN and ENUE by decomposing dynamics into short-, medium-, and long-run horizons; second, it highlights asymmetric responses across the growth distribution with respect to EPU, wherein uncertainty shocks become more contractionary in low-growth states of the economy while being weaker or sometimes statistically insignificant in high-growth regimes; third, treating energy consumption as a transmission mechanism indicates that disruptions due to uncertainty in energy mix along with changes in demand patterns partially account for negative spillover from uncertainty onto macro performance in the UK. Empirical results show that EPU has a predominantly negative impact on GDP, significantly constrains renewable deployment over longer horizons, and affects total energy use depending on the state of the economy. Further robustness tests undertaken via univariate wavelet quantile regression yield similar results. These findings underscore the need for credible, stable policy frameworks and targeted support for clean energy investments as prerequisites for resilience to uncertainty shocks and for sustained low-carbon growth pathways in the UK economy.