Risk transmission from the energy markets to the carbon market: Evidence from the recursive window approach
研究了欧洲碳市场与原油、煤炭、天然气和生物燃料等能源市场之间的波动传导关系，发现原油和煤炭市场的不确定性显著影响碳市场收益和波动，而生物燃料市场影响不显著，有助于碳市场参与者理解风险传导机制并优化风险管理。
The carbon market is an emerging trading system in the financial services sector, with its global market value increasing from $150 billion in 2010 to $851 billion in 2021. In this study, we examined the volatility transmission from the energy markets (i.e., crude oil, coal, natural gas, and biofuel) to the carbon market in Europe. Our sample period ranged from March 25, 2008, to July 17, 2020, and covered phases of different market conditions. We employed an asymmetric and unrestricted version of the bivariate GARCH-in-mean model, assuming flexible distributions within the recursive window framework. Our empirical findings indicate that (1) carbon market returns are negatively and significantly influenced by crude oil and coal market uncertainties, (2) carbon market volatility is significantly affected by crude oil and coal market volatilities, and (3) the biofuel market does not have a significant relationship with the carbon market, probably because the biofuel market is still young and immature. The results of our study could aid carbon market participants in better understanding the information and risk spillover mechanisms from the energy market to the carbon market and provide them with a basis to formulate policies and make decisions on risk management and portfolio optimization.