CLIMATE FINANCE IN THE WAKE OF COVID-19: CONNECTEDNESS OF CLEAN ENERGY WITH CONVENTIONAL ENERGY AND REGIONAL STOCK MARKETS

Sitara Karim, Shabeer Khan, Nawazish Mirza, Suha M. Alawi and Farhad Taghizadeh-Hesary

Chapter 6 in Sustainable Growth and Green Policies:Navigating Energy and Environmental Challenges, 2025, pp 131-155 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Focusing on raising climate concerns and sustaining a clean ecosystem, the current study strives to examine the connectedness of clean energy markets with conventional energy markets and four regional stock markets of Asia, Pacific, Europe, and America for the period spanning January 1, 2004 to August 31, 2021. We employed the volatility connectedness methodology using dynamic conditional correlation (DCC-GARCH) estimates for analysis purposes. There is pronounced within class connectedness of all markets except conventional energy markets, which showed strong disconnection from the network. However, strong inter-class spillovers are reported between clean energy and regional stock markets. Time-varying analysis revealed that intense spillovers are shaped during the Global Financial Crisis, Shale Oil Crisis, and COVID-19 pandemic. Meanwhile, time-varying net connectedness estimates illuminate that world renewable energy and American stock markets are net transmitters, whereas leftover markets are net recipients of spillovers. Further analysis of sub-sample periods during GFC, SOR, and COVID-19 validate that intense spillovers are formed when markets experience unexpected financial, economic, and global health turmoil. We proposed significant implications for regional stock markets of Asia, Pacific, Europe and America to concentrate on the climate-friendly energy markets than conventional energy markets as they service the clean ecosystem motives more specifically.

Keywords: Sustainable Growth; Green Policies; Energy Transition; Green Finance; Carbon Neutrality; Renewable Energy; Climate Change Policy; Environmental Sustainability; Economic Recovery; Carbon Markets; Sustainable Development; Energy Policy; Green Economic Recovery; Low-Carbon Economy; Financial Mechanisms For Sustainability; Climate Finance; Macroeconomic Policies and Sustainability; ESG Investing; Climate Resilience; Clean Energy Investment; Green Bonds; Sustainable Finance; Carbon Pricing; Energy Efficiency; Emerging Economies and Sustainability; Renewable Energy Financing; Circular Economy; Sustainable Investment; Climate Risk Assessment; Just Transition; ASEAN Energy Transition; BRICS Economies and Sustainability; OECD Green Policies; China's Carbon Market; EU Climate Policies; Southeast Asia Renewable Energy; Developing Economies and Climate Finance; Energy Poverty and Sustainable Solutions; Public Spending and Green Recovery; Net-Zero Policies; Econometric Models in Sustainability; Quantitative Analysis of Energy Markets; Cross-Sectional Autoregressive Distributed Lag Models; Behavioral Finance and Renewable Energy Investment; Policy Evaluation Frameworks; Decarbonization; Sustainable Development Goals; Green Growth (search for similar items in EconPapers)
JEL-codes: F64 O13 Q50 Q56 Q58 (search for similar items in EconPapers)
Date: 2025
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