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Electricity Market Crisis in Europe and Cross Border Price Effects: A Quantile Return Connectedness Analysis

Author

Listed:
  • Hung Xuan Do
  • Rabindra Nepal
  • Son Duy Pham
  • Tooraj Jamasb

Abstract

Despite the massive impacts of the COVID-19 pandemic and the Russia-Ukraine war on the European energy market, little is known about their effects on the transmission of risks between member states' electricity markets and key electricity sources. In this paper, we first employ the quantile connectedness approach to quantify the return connectedness between eleven European electricity markets, natural gas, and carbon market, then examine the impacts of the two crises on the interconnectedness. We find a significant return interconnectedness of the system, mainly driven by the spillover effects among European electricity markets. An investigation of the connectedness across quantiles shows that the spillover effects are much stronger at the tails of conditional distribution and the natural gas and carbon markets are net recipients of return shocks across quantiles. More importantly, our results reveal opposite effects of the two crises on interconnectedness. While the COVID-19 pandemic reduces the interconnectedness, the Russia-Ukraine war intensifies the return shock transmission.

Suggested Citation

  • Hung Xuan Do & Rabindra Nepal & Son Duy Pham & Tooraj Jamasb, 2023. "Electricity Market Crisis in Europe and Cross Border Price Effects: A Quantile Return Connectedness Analysis," CAMA Working Papers 2023-46, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2023-46
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-01/46_2023_do_nepal_pham_jamasb.pdf
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    Cited by:

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    2. Quanxiao Li & Zhouying Song, 2025. "Research on Energy Security in the EU from a Trade Perspective: A Historical Analysis from 1991 to 2021," Energies, MDPI, vol. 18(14), pages 1-24, July.
    3. Tripathi, Abhinava & Jha, Ravi Raushan & Vadhava, Charu, 2025. "A critique of the inappropriate interpretation of the quantile connectedness approach by Ando et al. (2022)," Energy Economics, Elsevier, vol. 143(C).
    4. Cristian Valeriu Stanciu & Narcis Eduard Mitu, 2025. "Price Behavior and Market Integration in European Union Electricity Markets: A VECM Analysis," Energies, MDPI, vol. 18(4), pages 1-25, February.

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    Keywords

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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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