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On the Effects of Physical Climate Risks on the Chinese Energy Sector

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  • Christian Oliver Ewald

    (Adam Smith Business School—Economics, University of Glasgow, Glasgow G12 8QQ, UK
    HINN Lillehammer, 2624 Lillehammer, Norway
    Department of Mathematics and Statistics, Umeå University, 901 87 Umeå, Sweden)

  • Chuyao Huang

    (Adam Smith Business School—Economics, University of Glasgow, Glasgow G12 8QQ, UK)

  • Yuyu Ren

    (Beijing Climate Centre, Beijing 100081, China)

Abstract

We examine the impact of physical climate risks on energy markets in China, distinguishing between traditional energy and new energy stock markets, and the energy commodity market, utilizing a time-varying parameter vector autoregressive model with stochastic volatility (TVP-SV-VAR). Specifically, we investigate the dynamic effects of five specific subtypes of physical climate risks, namely waterlogging by rain, drought, typhoon, cryogenic freezing, and high temperature, on WTI oil prices and coal prices. The findings reveal that these physical climate risks exhibit time-varying similar effects on the returns of traditional energy and new energy stocks, but heterogeneous effects on the returns of WTI oil prices and coal prices. Finally, we categorize and examine the impact of both acute and chronic physical risks on the energy commodity market.

Suggested Citation

  • Christian Oliver Ewald & Chuyao Huang & Yuyu Ren, 2024. "On the Effects of Physical Climate Risks on the Chinese Energy Sector," JRFM, MDPI, vol. 17(10), pages 1-15, October.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:10:p:458-:d:1494716
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    References listed on IDEAS

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