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Horizontal or vertical spillover: A study on the risk propagation mechanism of China's renewable energy industry chain

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  • Liu, Jing
  • Zhang, Jun

Abstract

This paper focuses on the China's renewable energy industry chain, employing the dynamic spillover index decomposition method to investigate the risk spillover effects within this chain. Innovatively, the total spillover effect is decomposed into horizontal spillover and vertical spillover. The empirical results reveal the following: First, significant risk linkage exists within China's renewable energy industry chain, with the main sources of risk contagion originating from the downstream segments. Second, vertical spillovers in the renewable energy industry chain are stronger than horizontal ones. In terms of industry segments, horizontal spillovers dominate in the upstream sector, while vertical spillovers are stronger in the downstream sector. Third, as the renewable energy industry matures and market mechanisms improve, there has been a notable shift in the risk propagation mechanism in China's renewable energy industry chain—from a dominance of vertical spillover to horizontal spillover. Fourth, compared to horizontal spillovers, vertical spillovers in the renewable energy industry chain have a more significant impact on the resilience of the chain. These findings are crucial for policymakers and stakeholders, offering insights into risk propagation in the renewable energy chain and guiding strategies for enhancing industry resilience.

Suggested Citation

  • Liu, Jing & Zhang, Jun, 2025. "Horizontal or vertical spillover: A study on the risk propagation mechanism of China's renewable energy industry chain," Renewable Energy, Elsevier, vol. 249(C).
    • Handle: RePEc:eee:renene:v:249:y:2025:i:c:s0960148125009462
    DOI: 10.1016/j.renene.2025.123284
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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