{"title":"Asymmetric tail risk spillover and co-movement between climate risk and the international energy market","authors":"David Adeabah , Thu Phuong Pham","doi":"10.1016/j.eneco.2024.108122","DOIUrl":null,"url":null,"abstract":"<div><div>We investigate the tail risk spillover, co-movement, and causal effect between climate risk and international energy markets using daily data from 2010 to 2022. Employing Bua et al.'s (2022) innovative measures of climate risk and various methodologies, we discover an asymmetric spillover of tail risk from climate to energy markets, emphasizing systemic tail risk contagion in extreme market conditions. Notably, climate risk primarily transmits downside tail risk in bearish states. The dynamic, negative, time-varying correlation between climate risk and energy markets is highlighted by wavelets analysis. Our study underscores that fluctuations in climate physical and transition risks can predict energy market tail risks, revealing tail risk dependence. The results also indicate a unidirectional causality from climate risks to the energy market.</div></div>","PeriodicalId":11665,"journal":{"name":"Energy Economics","volume":"141 ","pages":"Article 108122"},"PeriodicalIF":14.2000,"publicationDate":"2025-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Energy Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0140988324008314","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"2024/12/16 0:00:00","PubModel":"Epub","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate the tail risk spillover, co-movement, and causal effect between climate risk and international energy markets using daily data from 2010 to 2022. Employing Bua et al.'s (2022) innovative measures of climate risk and various methodologies, we discover an asymmetric spillover of tail risk from climate to energy markets, emphasizing systemic tail risk contagion in extreme market conditions. Notably, climate risk primarily transmits downside tail risk in bearish states. The dynamic, negative, time-varying correlation between climate risk and energy markets is highlighted by wavelets analysis. Our study underscores that fluctuations in climate physical and transition risks can predict energy market tail risks, revealing tail risk dependence. The results also indicate a unidirectional causality from climate risks to the energy market.
期刊介绍：
Energy Economics is a field journal that focuses on energy economics and energy finance. It covers various themes including the exploitation, conversion, and use of energy, markets for energy commodities and derivatives, regulation and taxation, forecasting, environment and climate, international trade, development, and monetary policy. The journal welcomes contributions that utilize diverse methods such as experiments, surveys, econometrics, decomposition, simulation models, equilibrium models, optimization models, and analytical models. It publishes a combination of papers employing different methods to explore a wide range of topics. The journal's replication policy encourages the submission of replication studies, wherein researchers reproduce and extend the key results of original studies while explaining any differences. Energy Economics is indexed and abstracted in several databases including Environmental Abstracts, Fuel and Energy Abstracts, Social Sciences Citation Index, GEOBASE, Social & Behavioral Sciences, Journal of Economic Literature, INSPEC, and more.
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