Library:
Berlin
London
Madrid
Paris Champerret
Paris Montparnasse
Turin
- Item type
- Study and report
- Dissertation
- Language
- English
- Publication year
- 2025
- Subjects
- ENERGY TRANSITION
Energy risks play a major role in sovereign creditworthiness, and the energy transition is increasingly viewed both as a new source of risk and as a potential solution to long-standing vulnerabilities. This thesis asks: How do energy transition strategies affect sovereign creditworthiness since the Paris Agreement? To answer this question, this thesis applies a multi-layered methodology that triangulates market data on energy policies and market shocks, institutional evidence, sectoral expert insights, and criteria-specific assessments to determine when and by how much energy transition strategies impact sovereign creditworthiness, and why and through which pillar of sovereign risk.
Results show no systematic impact premium for renewables nor a fossil fuel penalty. Diversified energy transition strategies are most resilient on average with smaller moves, less persistence, and quicker normalization, though they display higher within-group volatility as markets arbitrate two-sided exposures. Renewables leaders do not enjoy a short-run buffer in market shocks and largely track the macro cycle, but they exhibit lower volatility and modest medium-term improvement around energy transition policy milestones. Fossil-fuel sovereigns show asymmetric and moderately stronger reactions around energy market shocks, but there is no clear penalty around climate-policy milestones. Their impacts are more medium-term and persistent, with outcomes hinging on how windfalls are used to finance credible diversification. These findings inform both policy and investment. Fossil-fuel sovereigns should use current strengths to build buffers and be able to catch up with the transition once it matures. Renewable-leaning sovereigns should de-risk and carefully sequence markets to bring forward long-run gains. Diversified energy strategies should preserve and clearly communicate credible transition pathways to reduce current volatility. Investors should expect stronger medium-term reactions, evaluate fossil fuel countries on how effectively they deploy current strengths to diversify, anticipate greater long-term benefits from renewable leaders as markets mature, and allow for higher volatility in diversified transition strategies.
