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The Dynamic Spillover between Renewable Energy, Crude Oil and Carbon Market: New Evidence from Time and Frequency Domains

Author

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  • Dan Nie

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China)

  • Yanbin Li

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China)

  • Xiyu Li

    (School of Environment, Education & Development, The University of Manchester, Manchester M13 9PL, UK)

  • Xuejiao Zhou

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China)

  • Feng Zhang

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China)

Abstract

To obtain the price return and price volatility spillovers between renewable energy stocks, technology stocks, oil futures and carbon allowances under different investment horizons, this paper employs a frequency-dependent method to study the dynamic connectedness between these assets in four frequency bands. The results show that, first, there is a strong spillover effect between these assets from a system-wide perspective, and it’s mainly driven by short-term spillovers. Second, in the time domain, technology stocks have a more significant impact on renewable energy stocks compared to crude oil. However, through the study in the frequency domain, we find renewable energy stocks exhibit a more complex relationship with the other two assets at different time scales. Third, renewable energy stocks have significant spillover effect on carbon prices only in the short term. On longer time scales, other factors such as energy prices, climate and policy may have a greater impact on carbon allowance prices. Fourth, the spillover effect of the system is time-varying and frequency-varying. During the European debt crisis, the international oil price decline and the COVID-19 pandemic, the total spillover index of the system has experienced a substantial increase, mainly driven by medium, medium to long or long term spillovers.

Suggested Citation

  • Dan Nie & Yanbin Li & Xiyu Li & Xuejiao Zhou & Feng Zhang, 2022. "The Dynamic Spillover between Renewable Energy, Crude Oil and Carbon Market: New Evidence from Time and Frequency Domains," Energies, MDPI, vol. 15(11), pages 1-28, May.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:11:p:3927-:d:824614
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