Abstract
The accelerating global transition toward low-carbon development has introduced new layers
of environmental and sustainability-related uncertainty into fossil fuel markets. This study
investigates the nonlinear and state-dependent effects of climate risk and sustainability
uncertainty on crude oil prices across major oil-producing economies over the period January
2010 to December 2023. Employing the Quantile-on-Quantile Regression (QQR) framework,
the analysis models the interaction between the distribution of uncertainty measures and the
distribution of crude oil prices, thereby capturing asymmetric and regime-specific
transmission mechanisms that conventional mean-based approaches fail to detect. The
empirical findings reveal pronounced distributional heterogeneity. Climate risk exerts a
positive influence on oil prices under low-risk conditions but generates strong negative effects
when uncertainty intensifies, indicating forward-looking repricing of carbon-intensive assets.
Sustainability uncertainty displays predominantly negative yet country-specific effects, with
notable regime reversals in certain economies during extreme market states. The results
further demonstrate substantial cross-country variation, reflecting structural differences in
transition vulnerability, institutional frameworks, and oil revenue dependence. The study
establishes climate risk and sustainability uncertainty as structural determinants of crude oil
price dynamics. By uncovering nonlinear, state-contingent, and country-specific transmission
channels, the findings contribute to the evolving literature on environmental risk pricing and
energy market behaviour, offering important implications for policymakers, investors, and
energy-exporting economies navigating the global transition process.