The impact of national carbon market establishment on risk transmission among carbon and energy markets in China: A systemic importance analysis

Abstract

This paper examines the time–frequency spillovers between carbon, fossil energy and new energy stock markets through Diebold–Yilmaz (DY) and Barunik–Krehlik (BK) index models, paying special attention to the impact rendered by the establishment of China’s National Carbon Market (CNCM). Employing network analysis, the systemically important nodes among the markets are identified. We find that carbon market has turned from net risk receivers to transmitters since the CNCM establishment. The spillovers among the markets are smaller in the long-term compared with that in the medium- and short-term. We also infer that carbon market becomes more systematically important after the CNCM establishment.