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Risk Spillover of Energy-Related Systems Under a Carbon Neutral Target

Author

Listed:
  • Fei Liu

    (State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China)

  • Honglin Yao

    (State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China)

  • Yanan Chen

    (State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China)

  • Xingbei Song

    (State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China)

  • Yihang Zhao

    (CEC Technical & Economic Consulting Center of Power Construction, Electric Power Development Research Institute Co., Ltd., Beijing 100053, China)

  • Sen Guo

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China)

Abstract

Under the background of climate change, the risk spillover within the energy system is constantly intensifying. Clarifying the coupling relationship between entities within the energy system can help policymakers propose more reasonable policy measures and strengthen risk prevention. To estimate the risk spillover of energy-related systems, this paper constructs five subsystems: the fossil fuel subsystem, the electricity subsystem, the green bond subsystem, the renewable energy subsystem, and the carbon subsystem. Then, a quantitative risk analysis is conducted on two major energy consumption/carbon emission entities, China and Europe, based on the DCC-GARCH-CoVaR method. The result shows that (1) Markets of the same type often have more significant dynamic correlations. Of these, the average dynamic correlation coefficient of GBI-CABI (the Chinese green bond subsystem) and FR-DE (the European electricity subsystem) are the largest, by 0.8552 and 0.7347. (2) The high correlation between energy markets results in serious risk contagion, and the overall risk spillover effect within the European energy system is about 2.6 times that within the Chinese energy system. Of these, EUA and CABI are the main risk connectors of each energy system.

Suggested Citation

  • Fei Liu & Honglin Yao & Yanan Chen & Xingbei Song & Yihang Zhao & Sen Guo, 2025. "Risk Spillover of Energy-Related Systems Under a Carbon Neutral Target," Energies, MDPI, vol. 18(13), pages 1-27, July.
    • Handle: RePEc:gam:jeners:v:18:y:2025:i:13:p:3515-:d:1694234
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    References listed on IDEAS

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