How do climate risks intersect with the rise of new energy vehicles in China?

Lianhong Qiu, Xiaoqing Wong, Teng Zhang and Yubing Song

Economic Analysis and Policy, 2025, vol. 87, issue C, 675-688

Abstract: Exploring the complex relationships between climate risk and new energy vehicles is vital to advancing energy security and sustainable development in China. To quantify the dynamic correlations between the climate physical risk index (PRI), the transition risk index (TRI) and the sale of new energy vehicle (NEV), this study employs the time-varying parameter vector autoregression model with stochastic volatility, introducing oil price as a control variable. The quantitative analyses demonstrate that PRI has a negative effect on NEV, indicating that PRI decreases NEV in China. In contrast, TRI has a positive effect on NEV, indicating that TRI might increase NEV. Conversely, NEV positively and negatively impacts PRI, indicating challenges and opportunities in PRI mitigation. While NEV generally elevated TRI, PRI decreased during 2019–2020. Moreover, while PRI has a positive effect on TRI, it initially increases PRI and then reverses. As climate change intensifies globally, this study offers valuable insights for authorities to simultaneously boost NEV while addressing PRI and promoting energy security.

Keywords: Climate physical risks; Climate transition risks; New energy vehicles; Time-varying parameter vector autoregression; Energy security (search for similar items in EconPapers)
JEL-codes: C32 Q21 Q54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:87:y:2025:i:c:p:675-688

DOI: 10.1016/j.eap.2025.06.021

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