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How do climate risks intersect with the rise of new energy vehicles in China?

Author

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  • Qiu, Lianhong
  • Wong, Xiaoqing
  • Zhang, Teng
  • Song, Yubing

Abstract

Exploring the complex relationships between climate risk and new energy vehicles is vital to advancing energy security and sustainable development in China. To quantify the dynamic correlations between the climate physical risk index (PRI), the transition risk index (TRI) and the sale of new energy vehicle (NEV), this study employs the time-varying parameter vector autoregression model with stochastic volatility, introducing oil price as a control variable. The quantitative analyses demonstrate that PRI has a negative effect on NEV, indicating that PRI decreases NEV in China. In contrast, TRI has a positive effect on NEV, indicating that TRI might increase NEV. Conversely, NEV positively and negatively impacts PRI, indicating challenges and opportunities in PRI mitigation. While NEV generally elevated TRI, PRI decreased during 2019–2020. Moreover, while PRI has a positive effect on TRI, it initially increases PRI and then reverses. As climate change intensifies globally, this study offers valuable insights for authorities to simultaneously boost NEV while addressing PRI and promoting energy security.

Suggested Citation

  • Qiu, Lianhong & Wong, Xiaoqing & Zhang, Teng & Song, Yubing, 2025. "How do climate risks intersect with the rise of new energy vehicles in China?," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 675-688.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:675-688
    DOI: 10.1016/j.eap.2025.06.021
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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