Are interconnectedness and spillover alike across green sectors during the COVID-19 and the Russia–Ukraine conflict?

Waqas Hanif, Rim El Khoury, Nadia Arfaoui and Shawkat Hammoudeh

Energy Economics, 2025, vol. 144, issue C

Abstract: This study investigates interconnectedness and spillover dynamics among nineteen clean energy equity sub-sectors during the COVID-19 pandemic and the Russia-Ukraine conflict. Using the Time-Varying Parameter Vector Autoregression (TVP-VAR) Joint Connectedness approach, the findings reveal intensified interconnectedness during crises, with the Total Connectedness Index (TCI) surpassing 100 % during COVID-19, while stabilizing amid the Russia-Ukraine conflict, indicating a partial resilience in clean energy markets. Sub-sectors such as Energy Management, Recycling, and Water consistently serve as risk transmitters, while Wind and Geothermal absorb risks, emphasizing heterogeneous roles within the sector. This high level of interconnectedness limits the ability to reduce risks within the clean energy sector alone during turbulent times. Policy interventions, such as subsidies and regulatory support for critical risk-transmitting sub-sectors, could stabilize the market and reduce systemic vulnerabilities. Sectors like Solar and Smart Grid adapt to market conditions, taking on different roles depending on crisis-specific factors, particularly in response to energy security and sustainability policies. Investors may enhance their portfolio stability by focusing on the risk-absorbing sub-sectors, such as Wind and Geothermal, and also adopting dynamic asset allocation strategies during crises.

Keywords: Clean energy; Dynamic connectedness; Return and volatility spillovers; TVP-VAR extended joint connectedness (search for similar items in EconPapers)
JEL-codes: C58 F37 G11 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:144:y:2025:i:c:s0140988325001161

DOI: 10.1016/j.eneco.2025.108293

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