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How does COVID-19 affect the spillover effects of green finance, carbon markets, and renewable/non-renewable energy markets? Evidence from China

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  • Jiang, Wei
  • Dong, Lingfei
  • Liu, Xinyi

Abstract

COVID-19 brings new challenges to addressing climate change and achieving the goal of environmental sustainability. This paper examines how the COVID-19 pandemic affects transmission of returns spillovers among green finance, carbon market and renewable & non-renewable energy in China. We evaluate the dynamic and directional risk connectedness across time and at various frequency bands using Diebold and Yilmaz and Baruník and Křehlík approaches. First, the total spillover effects increase significantly when the COVID-19 outbreak. Second, the carbon price fluctuations are mainly influenced by non-renewable energy. Third, the spillover effect is mainly acted in the short term, meaning that it is strongly influenced by investor sentiment in the short term. Fourth, non-renewable energy and carbon markets are the main net recipients and can be used as hedge assets. Finally, the total spillover is time-varying that is affected by the unexpected crisis. The findings will help policymakers and environmental investors to develop policy measures and portfolios that are appropriate for different frequency domains.

Suggested Citation

  • Jiang, Wei & Dong, Lingfei & Liu, Xinyi, 2023. "How does COVID-19 affect the spillover effects of green finance, carbon markets, and renewable/non-renewable energy markets? Evidence from China," Energy, Elsevier, vol. 281(C).
    • Handle: RePEc:eee:energy:v:281:y:2023:i:c:s0360544223017450
    DOI: 10.1016/j.energy.2023.128351
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    Cited by:

    1. Li, Wenxue & Liu, Fei, 2023. "Financing green resource generation in sub-saharan Africa: Does financial integration matter?," Resources Policy, Elsevier, vol. 85(PB).

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