Risk Spillover of Energy-Related Systems Under a Carbon Neutral Target

Fei Liu, Honglin Yao, Yanan Chen, Xingbei Song, Yihang Zhao () and Sen Guo
Additional contact information
Fei Liu: State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China
Honglin Yao: State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China
Yanan Chen: State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China
Xingbei Song: State Grid Zhejiang Electric Power Co., Ltd., Construction Company, Hangzhou 310016, China
Yihang Zhao: CEC Technical & Economic Consulting Center of Power Construction, Electric Power Development Research Institute Co., Ltd., Beijing 100053, China
Sen Guo: School of Economics and Management, North China Electric Power University, Beijing 102206, China

Energies, 2025, vol. 18, issue 13, 1-27

Abstract: Under the background of climate change, the risk spillover within the energy system is constantly intensifying. Clarifying the coupling relationship between entities within the energy system can help policymakers propose more reasonable policy measures and strengthen risk prevention. To estimate the risk spillover of energy-related systems, this paper constructs five subsystems: the fossil fuel subsystem, the electricity subsystem, the green bond subsystem, the renewable energy subsystem, and the carbon subsystem. Then, a quantitative risk analysis is conducted on two major energy consumption/carbon emission entities, China and Europe, based on the DCC-GARCH-CoVaR method. The result shows that (1) Markets of the same type often have more significant dynamic correlations. Of these, the average dynamic correlation coefficient of GBI-CABI (the Chinese green bond subsystem) and FR-DE (the European electricity subsystem) are the largest, by 0.8552 and 0.7347. (2) The high correlation between energy markets results in serious risk contagion, and the overall risk spillover effect within the European energy system is about 2.6 times that within the Chinese energy system. Of these, EUA and CABI are the main risk connectors of each energy system.

Keywords: risk spillover; dynamic correlation; energy system; market price fluctuation; DCC-GARCH-CoVaR; carbon neutral target (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1996-1073/18/13/3515/pdf (application/pdf)
https://www.mdpi.com/1996-1073/18/13/3515/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:18:y:2025:i:13:p:3515-:d:1694234

Access Statistics for this article

Energies is currently edited by Ms. Agatha Cao

More articles in Energies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().