Volatility structure and risk spillover of natural gas, crude oil, new energy vehicle, and carbon markets in China — The role of climate policy uncertainty

At this critical juncture of the global energy transition, climate policy uncertainty (CPU) has evolved into a concrete market force reshaping energy sectors. This study employs a dual-model architecture – synergizing the GARCH-MIDAS model with a DCC-MIDAS-based connectedness framework – to examine CPU’s differential impacts on the volatility structure and risk spillovers across China’s natural gas, crude oil, new energy vehicle, and carbon markets. Empirical findings unveil a significant polarity: while CPU amplifies long-term volatility in the natural gas, crude oil, and new energy vehicle markets, it dampens volatility in the carbon market. The study also discloses the reconfiguration of risk spillovers transfer by CPU. Under the influence of CPU, the average risk spillovers received by the natural gas and crude oil markets diminish, but those absorbed by the new energy vehicle market increase substantially due to greater spillover from the crude oil and carbon markets. From a dynamic perspective, the interaction between the natural gas market and the new energy vehicle market weakens, while the crude oil market emerges as the dominant risk transmitter to the new energy vehicle market. Furthermore, the dynamic net spillover between the crude oil and new energy vehicle markets undergoes sign reversals during certain periods in the context of CPU. Additionally, the impact of CPU on total spillover is quantified, explaining about 9% of the variance in total risk spillover.