Understanding climate policy uncertainty: Evidence from temporal and spatial domains

This study examines the dynamic propagation process of Climate Policy Uncertainty (CPU) on commodity markets' positive and negative volatility, and compares the role of different climate policy uncertainty. The climate policy uncertainty considered here includes the American Climate Policy Uncertainty (ACPU), Chinese Climate Policy Uncertainty (CCPU), and Global Climate Policy Uncertainty (GCPU). We find that CPU plays an informative role in commodities markets, both for the commodity markets' positive and negative volatility. Notably, we observe a more pronounced spillover effect of CPUs on negative volatility compared to positive volatility, indicating heightened market sensitivity to adverse policy uncertainty shocks. As for the spillover speed, the transmission of CPUs to positive volatility initially outpaces that to negative volatility, but this trend reverses over time as the persistence of negative volatility becomes more dominant. Moreover, a comparative analysis across different CPUs underscores the preeminent role of CCPU, which exhibits the broadest spillover scale and the most rapid transmission velocity relative to its American and global counterparts.