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Exploring the Connection between Clean and Dirty Energy: Implications for the Transition to a Carbon-Resilient Economy

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  • Rui Dias

    (Instituto Politécnico de Setúbal, Escola Superior de Ciências Empresariais, 2910-761 Setúbal, Portugal)

  • Nuno Teixeira

    (Instituto Politécnico de Setúbal, Escola Superior de Ciências Empresariais, 2910-761 Setúbal, Portugal)

  • Paulo Alexandre

    (Instituto Politécnico de Setúbal, Escola Superior de Ciências Empresariais, 2910-761 Setúbal, Portugal)

  • Mariana Chambino

    (Instituto Politécnico de Setúbal, Escola Superior de Ciências Empresariais, 2910-761 Setúbal, Portugal)

Abstract

This study investigates the relationship between clean and dirty energy markets, specifically focusing on clean energy stock indexes and their potential as hedging assets and safe havens during periods of global economic uncertainty. The research analyzes five clean energy indexes and four dirty energy indexes from May 2018 to May 2023, considering events such as the global pandemic and the Russian invasion of Ukraine. The main objective is to examine the causal relationship among different stock indexes pertaining to dirty and clean energy by using the Granger causality test (VAR Granger Causality/Block Exogeneity Wald Test) to determine whether clean energy indexes can predict future prices of dirty energy indexes. However, the findings reveal that clean and dirty energy indexes do not exhibit hedging characteristics or serve as safe havens during times of economic uncertainty, rejecting the research question. These results have important implications for investment strategies, as assets lacking safe haven characteristics may not preserve portfolio efficiency in uncertain times. The study’s insights provide valuable guidance for investors, policymakers, and participants in energy financial markets. It highlights the need to adapt investment approaches and seek alternative options to navigate uncertain economic conditions effectively.

Suggested Citation

  • Rui Dias & Nuno Teixeira & Paulo Alexandre & Mariana Chambino, 2023. "Exploring the Connection between Clean and Dirty Energy: Implications for the Transition to a Carbon-Resilient Economy," Energies, MDPI, vol. 16(13), pages 1-21, June.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:13:p:4982-:d:1180511
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