The Impact of Climate Policy Risk on Carbon-Emission Heterogeneous Assets: Evidence from China

Jianfeng Li, Xiaoyang Yao, Guanglin Sun, Tongyu Lu and Wei Le

Emerging Markets Finance and Trade, 2025, vol. 61, issue 2, 354-369

Abstract: This study investigates the impact of climate policy uncertainty (CPU) on the price, volatility, and dynamic correlation of heterogeneous carbon emission assets in China. Our empirical results reveal that high-carbon assets and the first group of low-carbon assets, including renewable energy, new energy, geothermal, wind power, and photovoltaic power, have significant climate-policy risk exposure. The impact of CPU on the price and volatility of the second group of low-carbon assets, which includes governance, responsibility, sustainability, hydropower, and low-carbon sectors, is either positive or insignificant. CPU can lead to a significant decrease in the correlation between high- and low-carbon assets, especially during periods of high CPU. Moreover, we identify several low-carbon assets with strong hedging performance against the risks of high-carbon assets.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:61:y:2025:i:2:p:354-369

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DOI: 10.1080/1540496X.2024.2391327

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