Abstract
A series of policies proposed to deal with climate change has affected the development of the natural gas market. This study aims to investigate whether climate policy uncertainty (CPU) affects natural gas from a dynamic perspective. First, we employ the time-varying Granger causality test to test the impact of CPU on natural gas over time. The results show that events related to climate policy can lead to changes in this impact. Then, we detect the long-, mid-, and short-run changes in this impact by using the frequency-domain Granger causality test. We find that the CPU only holds a significant long-run effect on natural gas. However, considering that raised CPU and declined CPU may have different effects on natural gas, we further apply the asymmetric frequency-domain test, and the results verify that this unidirectional risk transmission has asymmetry. Particularly, we find that increased CPU may lead to a decline in natural gas in the medium run, and this impact lasts until the end of the sample. Thus, market participants invested in natural gas markets should pay attention to the events related to climate policies and the long-run impact of CPU, especially of increased CPU shocks.
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