Geopolitical fragmentation and energy transition inequalities: Climate policy uncertainty, sanctions, and the oil and gas sector

Abstract

Geopolitical fragmentation, intensifying climate policy uncertainty, and conflict-driven trade disruptions have reshaped the global energy landscape, with serious implications for both energy transition and energy poverty. This study investigates how geopolitical risks, such as war, sanctions, and fractured alliances, interact with climate policy uncertainty to influence the financial performance and strategic adaptability of oil and gas firms. Using ATET analysis on 374 publicly listed firms across 45 countries (2019–2023), we assess market responses before and after the 2022 Russia–Ukraine conflict. Key findings include: (1) Russian oil and gas firms significantly outperformed peers prior to 2022 under stable geopolitical conditions; (2) Post-sanctions, Western firms gained competitive advantage while Russian firms experienced declining profit margins despite stable revenues; (3) Firms based in sanctioning and sanctioned nations demonstrated higher resilience, whereas those in neutral economies faced growing financial instability amid policy unpredictability. The findings highlight how climate policy uncertainty and fragmented global governance exacerbate energy access inequalities, complicating efforts to achieve a just and inclusive energy transition. To address these tensions, the study advocates for coordinated energy policies that integrate geopolitical risk into climate strategies, especially for supporting vulnerable economies in the Global South. Aligning energy security with long-term sustainability goals is essential to mitigate the risks of energy poverty and ensure equitable progress toward decarbonization