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Dynamic interlinkages between carbon risk and volatility of green and renewable energy: A TVP-VAR analysis

Le Thanh Ha, Ahmed Bouteska, Taimur Sharif, Mohammad Abedin

Research in International Business and Finance, Volume: 69

Swansea University Author: Mohammad Abedin

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DOI (Published version): 10.1016/j.ribaf.2024.102278

Abstract

Our paper applies a time-varying parameter vector autoregression (TVP-VAR) in combination with an extended joint connectedness approach to investigate interlinkages among carbon emissions futures and the volatility of the renewable energy sector. The findings show that the system-wide dynamic connec...

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Published in: Research in International Business and Finance
ISSN: 0275-5319
Published: Elsevier BV 2024
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URI: https://cronfa.swan.ac.uk/Record/cronfa65711
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Abstract: Our paper applies a time-varying parameter vector autoregression (TVP-VAR) in combination with an extended joint connectedness approach to investigate interlinkages among carbon emissions futures and the volatility of the renewable energy sector. The findings show that the system-wide dynamic connectedness realized a peak in early 2020 in the wake of the COVID-19 crisis. Net total directional connectedness proves that carbon emissions futures and wind energy play the roles of both net transmitters and net receivers of shocks in both periods – before and after the pandemic. The findings of this paper can support policy formulations to avoid rapid fluctuations in carbon prices, make the carbon price table, and limit the negative effect of carbon risk on the energy market, while promoting the protection of systemic financial risks in the renewable energy sector and ensuring a green energy supply.
Keywords: Carbon risk; Green and renewable energy; COVID-19 pandemic; Dynamic connectedness; Joint connectedness; TVP-VAR
College: Faculty of Humanities and Social Sciences

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