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Dynamic spillovers of green, brown, and financial industries under the low-carbon transition: Evidence from China

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  • He, Wenjing
  • Yao, Xiaoyang
  • Sun, Xiaolei
  • Le, Wei
  • Yi, Ronghua

Abstract

Climate change has garnered significant global attention, with uncertainty surrounding the economic consequences of the transition to low-carbon emissions posing potential risks to financial markets. To assess the heterogeneous effects of this transition on financial markets, 22 carbon-sensitive industries in the Chinese market, classified into brown, green, and financial sectors, are analyzed by using the LASSO-VAR-DY model and complex network analysis. The results reveal that spillovers have changed over different stage and gradually shifted from intra-sector spillovers to more complex inter-sector spillovers. Particularly noteworthy is that this inter-sector spillover effect is especially pronounced among industries with close production linkages. Besides, the brown sector consistently acts as a spillover sender, while the financial sector becomes closely interconnected, albeit at a greater risk from the brown sector than from the green sector. These findings highlight the need to consider the spillover effects for maintaining financial stability and constructing investment portfolios.

Suggested Citation

  • He, Wenjing & Yao, Xiaoyang & Sun, Xiaolei & Le, Wei & Yi, Ronghua, 2024. "Dynamic spillovers of green, brown, and financial industries under the low-carbon transition: Evidence from China," Energy Economics, Elsevier, vol. 139(C).
    • Handle: RePEc:eee:eneeco:v:139:y:2024:i:c:s0140988324006091
    DOI: 10.1016/j.eneco.2024.107901
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