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Dynamics of extreme spillovers between clean energy stocks and fossil fuels: The role of climate policy uncertainty and geopolitical risks

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  • Fasanya, Ismail O.
  • Mubaiwa, Darren T.

Abstract

The study examines the effect of climate policy uncertainty and geopolitical risk on the intermarket spillovers among clean energy stocks and fossil fuels. Based on US data between December 2000 and August 2023, we first analyse volatility spillovers among clean energy stocks and fossil fuels using the TVP-VAR model. Our empirical analyses demonstrate that there is strong connectedness between clean energy stocks and fossil fuels. Notwithstanding, we observe that the spillovers among fossil fuels (crude oil, diesel, jet fuel etc.) are stronger than the intermarket spillovers between these energy commodities and the clean energy stock market. Furthermore, using the causality-in-quantiles and Quantile-on-Quantile regression techniques, we find that both climate policy uncertainty and geopolitical risk have a formidable impact on clean energy stock and fossil fuel intermarket spillovers. Moreover, the effects among these phenomena are heterogeneous across each of their distributions. These findings constitute important information for investment practitioners and policymakers.

Suggested Citation

  • Fasanya, Ismail O. & Mubaiwa, Darren T., 2025. "Dynamics of extreme spillovers between clean energy stocks and fossil fuels: The role of climate policy uncertainty and geopolitical risks," Energy, Elsevier, vol. 335(C).
    • Handle: RePEc:eee:energy:v:335:y:2025:i:c:s036054422503909x
    DOI: 10.1016/j.energy.2025.138267
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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