Relation exploration between clean and fossil energy markets when experiencing climate change uncertainties: substitutes or complements?

During the crucial stage of the energy transition for combating extreme climate changes, it has been frequently discussed: Whether clean and fossil energies are substitutes or complements? To answer this question, we first analyze the correlations of some main clean and fossil energy markets in 2015–2022. After identifying and measuring the volatility spillovers in these energy markets, the original sequence is decomposed into three subsequences in each time-frequency to accurately capture the temporal relations in the short or long term. Furthermore, we select three periods when global climate change issues occurred frequently for the event analysis, then explore the linkages between the energy markets when experiencing climate uncertainties from different time dimensions. We find that the close interactions between clean energy markets are mainly presented in the long term. Meanwhile, even though the spillover effects between the oil market and others are not obvious in the original sequence, significant spillovers could be observed in the selected periods. Therefore, we can infer that the frequently-occurred climate change issues could be one of the reasons that trigger the volatility spillovers between the oil and other energy markets. As climate uncertainties increase, different reactions between the energy markets can be seen in the short term, while a synchronized trend is also easily observed in the long term. Hence, we conclude that these energies could be substitutes in the short term, while complements in the long run. The above analytic results could be helpful for policymakers and investors to cope with the market fluctuations that are brought by climate issues.