Abstract
ABSTRACT We elucidate the connectedness mechanisms between carbon and energy price volatilities using representative data from the carbon and fossil energy markets. Our findings reveal that the volatilities of carbon and energy prices are connected through common exposure and contagion mechanisms. The common exposure mechanism indicates that systemic events, such as the COVID-19 pandemic, financial pressures, and the Russia – Ukraine conflict, induce simultaneous volatility in both carbon and energy prices. Additionally, the contagion mechanism demonstrates that price volatility connectedness is higher when the carbon and energy markets face higher pressure.
Published Version
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