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Spillover Effects among Electricity Prices, Traditional Energy Prices and Carbon Market under Climate Risk

Author

Listed:
  • Donglan Liu

    (State Grid Shandong Electric Power Research Institute, Jinan 250003, China)

  • Xin Liu

    (State Grid Shandong Electric Power Research Institute, Jinan 250003, China)

  • Kun Guo

    (School of Economics and Management, University of Chinese Academy of Sciences, Beijing 101408, China)

  • Qiang Ji

    (Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
    School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100190, China)

  • Yingxian Chang

    (State Grid Shandong Electric Power Company, Jinan 250001, China)

Abstract

With the increase in global geopolitical risks and the frequent occurrence of extreme climate in recent years, the electricity prices in Europe have shown large fluctuations. Electricity price has an important impact on the cost of production and living, while electricity demand will also affect other energy markets. A double-layer system based on the spillover effects from a systematic perspective is constructed in this paper to explore the connectedness between different electricity markets and other related energy markets in Europe, considering the impact of climate risks. The results show that there are certain spillover effects among electricity markets in different countries, with a temporary upward trend in the beginning of the Russia–Ukraine conflict, and the electricity markets in the UK and Germany have a more important role in Europe. There are two-way spillover effects between the electricity market and fossil fuel markets, carbon market and carbon emission. Since 2022, the electricity market is affected by gas prices, while it has a certain impact on carbon emissions. The heating degree day ( HDD ) has significant spillover effects on the electricity market and other energy markets, while the spillover effects of the cooling degree day ( CDD ) are relatively small.

Suggested Citation

  • Donglan Liu & Xin Liu & Kun Guo & Qiang Ji & Yingxian Chang, 2023. "Spillover Effects among Electricity Prices, Traditional Energy Prices and Carbon Market under Climate Risk," IJERPH, MDPI, vol. 20(2), pages 1-18, January.
    • Handle: RePEc:gam:jijerp:v:20:y:2023:i:2:p:1116-:d:1028983
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    References listed on IDEAS

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    2. Gupta, Rangan & Nel, Jacobus & Salisu, Afees A. & Ji, Qiang, 2023. "Predictability of economic slowdowns in advanced countries over eight centuries: The role of climate risks," Finance Research Letters, Elsevier, vol. 54(C).
    3. Shen, Yiran & Sun, Xiaolei & Ji, Qiang & Zhang, Dayong, 2023. "Climate events matter in the global natural gas market," Energy Economics, Elsevier, vol. 125(C).
    4. Guo, Kun & Liu, Fengqi & Sun, Xiaolei & Zhang, Dayong & Ji, Qiang, 2023. "Predicting natural gas futures’ volatility using climate risks," Finance Research Letters, Elsevier, vol. 55(PA).
    5. Bo Yu & Zhijia Chang, 2024. "Connectedness of Carbon Price and Energy Price under Shocks: A Study Based on Positive and Negative Price Volatility," Sustainability, MDPI, vol. 16(12), pages 1-26, June.

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