Nonlinear dependence and connectedness between clean/renewable energy sector equity and European emission allowance prices

Waqas Hanif, Jose Arreola Hernandez, Walid Mensi, Sang Hoon Kang, Gazi Uddin and Seong-Min Yoon

Energy Economics, 2021, vol. 101, issue C

Abstract: This study examines frequency volatility spillovers, connectedness and the nonlinear dependence between the European emission allowance (EUA) prices and renewable energy indices. For this purpose, we use a time-scale spillover index and different copula functions. The results show a dominance of short-term volatility spillovers between carbon prices and renewable energy indices over their long-term counterpart. More importantly, the spillover strength is high between carbon prices and both S&P clean energy and wind energy indices in the short term. Meanwhile, a strong spillover is most pronounced between the clean energy indices and the carbon price in the long term. Furthermore, the carbon price is predominantly the receiver of spillovers from the clean energy indices irrespective of the time horizon. Using dynamic copula, we show positive and dynamic dependence between the carbon prices and both clean and solar indices, whereas an asymmetric tail dependence between carbon prices and renewables, technology and wind indices.

Keywords: Renewable energy; European emission allowance; Frequency spillover; Copula (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:101:y:2021:i:c:s0140988321003066

DOI: 10.1016/j.eneco.2021.105409

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