Untangling Carbon–Clean Energy Dynamics: A Quantile Granger-Causality Perspective

Wei Jiang, Jingang Jiang and Sonia Chien-I Chen ()
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Wei Jiang: School of Economics, Qingdao University, Qingdao 266071, China
Jingang Jiang: School of Economics, Qingdao University, Qingdao 266071, China
Sonia Chien-I Chen: School of Economics, Qingdao University, Qingdao 266071, China

Sustainability, 2025, vol. 17, issue 7, 1-20

Abstract: This study examines the dynamic relationship between carbon markets and clean energy stocks using a quantile Granger-causality framework, capturing nonlinear dependencies across different market conditions. Unlike conventional mean-based approaches, this method identifies asymmetric causal linkages, particularly during periods of extreme market movements. Empirical results reveal a bidirectional Granger-causal relationship between carbon price returns and clean energy stock returns, predominantly at the lower quantile τ = 0.25 and upper quantile τ = 0.75 of the conditional distribution. This indicates that carbon price fluctuations significantly impact clean energy investments during bullish (>0.50 quantiles) and bearish (<0.50 quantiles) trends, while the effect is weaker during stable periods (0.50 quantile). Additionally, findings suggest that the impact of carbon pricing varies across regions. While the signs of the Granger-causality running from carbon markets to clean energy stocks are less than 0 in global, European, and U.S. markets, China’s policy-driven sustainability initiatives mitigate these risks, enhancing investment stability. These findings underscore the importance of region-specific carbon policies in supporting clean energy growth. Policymakers should consider stabilization mechanisms in volatile markets and strategic carbon pricing to optimize investment incentives. Future research should explore the role of green financial innovations in enhancing carbon market efficiency and reducing investment uncertainty in clean energy transitions.

Keywords: carbon market; clean energy; Granger causality; quantile regression; regional heterogeneity; policy implications (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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