Ripple Effects of Climate Policy Uncertainty: Risk Spillovers Between Traditional Energy and Green Financial Markets

Jianing Liu, Jingyi Guo and Yuanyuan Man ()
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Jianing Liu: School of Business Administration, Northeastern University, Shenyang 110169, China
Jingyi Guo: School of Business Administration, Northeastern University, Shenyang 110169, China
Yuanyuan Man: School of Business and Management, Jilin University, Changchun 130012, China

Sustainability, 2025, vol. 17, issue 12, 1-20

Abstract: This study employs the TVP-VAR-DY model to examine the risk spillover effects and dynamic interactions between traditional energy markets and green financial markets across both time and frequency domains. Furthermore, it evaluates the influence of climate policy uncertainty on these risk spillovers. The findings reveal substantial risk spillover effects between traditional energy markets and green financial markets. In the time domain, the total spillover effects exhibit distinct time-varying characteristics, with particularly pronounced changes under the influence of policy shocks. In the frequency domain, risk spillovers are significantly higher in the short term compared to the medium and long term. Additionally, climate policy uncertainty emerges as key driver of intensified risk spillovers between markets, with its influence initially increasing and then gradually diminishing over time. This study not only provides theoretical support for optimizing climate policies but also offers empirical evidence for prevention and mitigation of risk contagion between energy and green financial markets.

Keywords: climate policy uncertainty; spillover effects; green financial markets; TVP-VAR-DY model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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