Research On The Fluctuation Spillover Effect Of China’s Carbon Market On New Energy Market

At the beginning of the 21st century,the negative impacts of global climate change on the environment have attracted widespread attention,leading to increasing concerns from researchers and policymakers regarding carbon reduction and new energy sources.The volatility signals in the carbon market serve as forward-looking policy signals that transmit to the stock market and subsequently influence investors’ market expectations.In this context,studying the relationship between the carbon market and the new energy stock market becomes particularly important.On one hand,the volatility in the carbon market can affect the confidence of investors in the new energy industry,thereby influencing the performance of the new energy stock market.On the other hand,the development of the new energy stock market can also impact the demand and price volatility in the carbon market.Therefore,studying the volatility spillover effects between China’s carbon emission trading market and the new energy stock market is of great practical significance in revealing the interrelationship between these two markets and guiding policy-making and investment decisions.This study utilizes the China Securities Index Company’s Mainland New Energy Index,the Global Clean Energy ETF(ICLN),and the WilderHill Clean Energy ETF(PBW)as price datasets for the new energy stock market.The daily weighted average prices of carbon allowances in the five carbon pilot markets of Shenzhen,Beijing,Shanghai,Guangdong,and Hubei represent the overall carbon market in China.The sample period for the study is from April 2,2014,to December 31,2021.The study investigates the volatility spillover effects between the carbon market prices and the new energy stock market prices.Considering the advantages of Copula functions in studying the dynamic correlation of volatility spillover effects between the markets,a VAR model,BEKK-GARCH model,and DCC-GARCH model are employed.Finally,through empirical analysis,it is found that there is a certain dynamic correlation between China’s carbon market and the domestic and international new energy stock markets.There are bidirectional volatility spillover effects between China’s carbon market and the domestic new energy stock market,as well as between China’s carbon market and the international new energy stock market(ICLN,PBW).Additionally,impulse response analysis indicates that the impact of the carbon market on the new energy stock market is significant in the short term but gradually weakens over time.Similarly,the impact of the new energy stock market on the carbon market is also significant in the short term and subsequently diminishes.The variance decomposition results further confirm this conclusion,demonstrating a relationship between the two markets with decreasing contributions to each other over time.Based on the empirical research findings,the following recommendations are proposed for policymakers,energy-intensive companies,and investors:(1)For policymakers,targeted carbon market policies and new energy stock market policies can be formulated based on the research results of volatility spillover effects to ensure market stability and sustainable development.Moreover,the government can reduce the economic impact of carbon market price volatility through regulatory measures.(2)For energy-intensive companies,adjusting energy consumption structure based on the volatility spillover effects between the new energy stock market and the carbon market can be considered.By analyzing profitability,companies can assess whether to invest in technological innovation or adjust the amount of future investment to better evaluate market risks and formulate appropriate business strategies.(3)For investors,studying the volatility spillover effects between the carbon market and the new energy stock market can help capture market opportunities and optimize investment portfolios,creating more returns and mitigating investment risks.