The dynamic risk spillover effects among carbon, renewable energy, and electricity markets based on the TVP-VAR-DY model.

Abstract

The linkages among carbon, renewable energy, and electricity markets are gradually strengthening. In order to prevent risk transmission among markets, this paper uses the TVP-VAR-DY (Time-Varying Parameter-Vector Auto Regression-Dynamic) model to analyze the dynamic risk spillover effects and network structure of risk transmission among carbon, renewable energy, and electricity markets. The empirical results show that there are significant asymmetric spillover effects among carbon, renewable energy, and electricity markets. The total spillover index shows that spillover effects among carbon, renewable energy, and electricity markets are time-varying, especially during unexpected events. Besides, the net spillover index indicates that the spillover effects are bidirectional, asymmetric, and time-varying. Finally, under the influence of unexpected events, the network structures of risk transmission among carbon, renewable energy, and electricity markets are heterogeneous. Compared to the Russia-Ukraine conflict, the COVID-19 pandemic has a more significant impact on these markets.