Hedging potentials of green investments against climate and oil market risks

PurposeThis study aims to examine the ability of clean energy stocks to provide cover for investors against market risks related to climate change and disturbances in the oil market.Design/methodology/approachThe study adopts the feasible quasi generalized least squares technique to estimate a predictive model based on Westerlund and Narayan's (2015) approach to evaluating the hedging effectiveness of clean energy stocks. The out-of-sample forecast evaluations of the oil risk-based and climate risk-based clean energy predictive models are explored using Clark and West's model (2007) and a modified Diebold & Mariano forecast evaluation test for nested and non-nested models, respectively.FindingsThe study finds ample evidence that clean energy stocks may hedge against oil market risks. This result is robust to alternative measures of oil risk and holds when applied to data from the COVID-19 pandemic. In contrast, the hedging effectiveness of clean energy against climate risks is limited to 4 of the 6 clean energy indices and restricted to climate risk measured with climate policy uncertainty.Originality/valueThe study contributes to the literature by providing extensive analysis of hedging effectiveness of several clean energy indices (global, the United States (US), Europe and Asia) and sectoral clean energy indices (solar and wind) against oil market and climate risks using various measures of oil risk (WTI (West Texas intermediate) and Brent volatility) and climate risk (climate policy uncertainty and energy and environmental regulation) as predictors. It also conducts forecast evaluations of the clean energy predictive models for nested and non-nested models.

Economic development, social media awareness, and technological innovation in biogas sector under climate change in the post-COVID-19 pandemic conditions.

After COVID-19, financing for emerging nation reserves in renewable energy bases was deemed a crucial aspect of sustainable development. Investing in biogas energy plants can be highly beneficial for lowering the use of fossil fuels. Using a survey of shareholders, investors, biogas energy professionals, and active social media participants in Pakistan, this study evaluates the intentions of individual investors to invest in biogas energy plants. The primary purpose of this study is to increase investment intent for biogas energy projects following COVID-19. This study focuses on financing biogas energy plants in the post-COVID-19 era and evaluates the research's assumptions using partial least squares structural equation modeling (PLS-SEM). The study employed the technique of purposive sampling to acquire data for this investigation. The results indicate that attitudes, perceived biogas energy benefits, perceived investment attitudes, and supervisory structure evaluations inspire one's propensity to finance biogas vitality plant efforts. The study found a link between eco-friendly responsiveness, monetary benefits, and investors' actions. The aspiration of investors to mark such reserves was set up to be unpretentious by their risk aversion. Conferring to the facts, evaluating the monitoring structure is the critical factor. The previous studies on investment behavior and other forms of pro-environmental intent and action yielded contradictory results. In addition, the regulatory environment was evaluated to see how the theory of planned behavior (TPB) affects financiers' objectives to participate in biogas power plants. The consequences of the study indicate that feelings of pride and discernment of energy expansively affect people's desire to invest in biogas plants. Biogas energy efficacy has little effect on investors' decisions to invest in biogas energy plants. This study offers policymakers practical ideas on enhancing investments in biogas energy plants.

The reaction of the metal and gold resource planning in the post-COVID-19 era and Russia-Ukrainian conflict: Role of fossil fuel markets for portfolio hedging strategies

The prime objective of this article is to examine the policy-making role of metal markets, gold resources, and clean energy markets in the post-COVID-19 era and the Russia-Ukrainian military conflict. In doing so, we analyze the role of fossil fuels, clean energy, and metals markets, considering the military conflict in Ukraine in 2022. The study employs event study methodology (ESM), Total connectedness index (TCI), and network analyses. The results indicate that natural gas and clean energy prices are less affected by conflict in the aftermath of an invasion than traditional energy and metals markets. In addition, we observe an increase in the TCI in the energy markets during announcement days. The TCI of the metals market is greater than that of the energy market. According to network connectivity, the key asset class transmitters of the shock in Europe are the Geopolitical index (GPR), gold, and the clean energy stock index (ERIX). The U.S. markets are less affected by the situation in Ukraine. The average hedge suggests that the optimal hedge differs from one market to the next, with fossil fuels and renewable energy, respectively, being more hedge effective and reducing risk by an average of around 0.80 and 0.59, given their ability to function as a hedging instrument.

Research and Development of a New Sustainable Functional Food under the Scope of Nutrivigilance

Background: The New Global Economy is represented by a series of major features, such as the use of green energy, the reduction of the carbon footprint in all industrial and civil fields, as well as finding alternative food resources. Our main objective was the research of a sustainable food product with a special nutritional purpose in the vision of nutrivigilance, developed in Romania, as an adjuvant in the repair of gastric mucosa. Methods: The materials used in the research and development of the new food are the following: inulin, lactoferrin, sericin, and sodium bicarbonate. The new adjuvant food product in the repair of the gastric mucosa was added to certain foods in order to prevent the patients from being satiated by a single food from a sensory point of view. The resulting food products were organoleptically and physico-chemically analyzed. Results: The new food is sustainable and has versatile uses. It can be hydrated with water, non-carbonated drinks, mixed with cottage cheese, or with fruit puree and oatmeal. It is stable under normal storage conditions and microbiologically safe. Conclusions: Through its versatile use, the new food product for special nutritional conditions represents a worldwide novelty. Through the development of forestry for the cultivation of white or black mulberry (Morus alba and Morus nigra), the raising of silkworms (Bombyx mori), the processing of fibroin to obtain natural silk and the processing of sericin resulting as a residue in the textile industry, the new food product developed actively contribute to the global economy II.

Impacts of environmental policy uncertainty on urban environmental pollutant emissions in China: a study based on textual analysis

How to accelerate the clean use of fossil energy and promote the transformation and upgrading of energy structure is an important challenge commonly faced by countries around the world. In the post-Covid-19 era, the uncertainties faced by countries around the world are increasing and the frequency of policy adjustments in various countries is accelerating. The discharge of pollution by enterprises is significantly impacted by environmental regulatory policies. Under the carbon neutrality goal, the uncertainty of environmental policy caused by multiple political factors can directly influence the decisions made by businesses and residents, in turn, affect their confidence and expectations. However, researchers have given limited attention to measuring the environmental policy uncertainty index (EPUI). In this paper, we select 460 newspapers from the China National Knowledge Infrastructure (CNKI) newspaper database from 2001 to 2016 and use the text analysis method to directly construct China's national, provincial, and prefecture-level EPUI. The results show that China's EPUI has obvious stage characteristics and regional characteristics. By applying the Chinese city-level EPUI to the field of urban pollution reduction, we have obtained an important finding that when urban environmental policy uncertainty increases by 1%, urban industrial sulfur dioxide emission decreases by about 0.145%, and carbon dioxide emission decreases by about 0.053%. We believe that this is due to an increase in environmental policy uncertainty inhibiting the development and scaling of secondary industries.

Dependence structure among rare earth and financial markets: A multiscale-vine copula approach

This paper examines the dynamic upper and lower tail dependence across rare earth metals, clean energy, gold, world equity, base metals, and crude oil markets at various time scales. Firstly, raw return series are decomposed into various time scales using the maximum overlapping discrete wavelet transform method, then the time-varying pairwise dependencies, accounting for the impact of the covariate (in our case, the rare earth stock index), are analysed using vine-copula. This so called multiscale-vine copula approach is applied to daily data from June 25, 2009 to October 7, 2022, covering the Covid-19 outbreak. The results show that, for raw returns, the rare earth market moderates the positive dependence between world equity and clean energy markets. At the short-term time scale, unlike other pairwise dependencies, rare earth eases the dependency between clean energies. During the Covid-19 pandemic period, the rare earth stock index significantly affects the correlation of the gold and oil markets and makes them more resilient to global health shocks. At the mid-term time scale, the impact of the rare earth index is more pronounced, for both the entire sample and during the Covid-19 outbreak, as the dynamic dependencies of most indices, such as clean energy-world equity, base metals-world equity, and crude oil-clean energy, significantly decline after accounting for the influence of rare earth metals. The main result at the long-term time scale is that the Covid-19 pandemic moderates the dependency of clean energy-gold even further when considering the impact of the rare earth stock index. In general, the rare earth stock index plays a significant role in easing the extent of dependency in the medium term during the entire sample and the pandemic. These findings provide some useful implications for heterogeneous investors and market participants operating at various time scales.

Performance of Equity Investments in Sustainable Environmental Markets

Despite a significant increase in global clean energy investments, as part of the decarbonization process, it remains insufficient to meet the demand for energy services in a sustainable manner. This study investigates the performance of sustainable energy equity investments, with focus on environmental markets, using monthly equity index data from 31 August 2009 to 30 December 2022. The main contributions of our study are (i) assessment of the performance of trading strategies based on the trend, momentum, and volatility of Environmental Opportunities (EO) and Environmental Technologies (ET) equity indices;and (ii) comparison of the performance of sustainable equity index investments to fossil fuel-based and major global equity indices. Market performance evaluation based on technical analysis tools such as the Relative Strength Index (RSI), Moving Averages, and Average True Range (ATR) is captured through the Sharpe and the Sharpe per trade. The analysis is divided according to regional, sector, and global EO indices, fossil fuel-based indices, and the key global stock market indices. Our findings reveal that a momentum-based strategy performed best for the MSCI Global Alternative Energy index with the highest excess return per unit of risk, followed by the fossil fuel-based indices. A trend-based strategy worked best for the MSCI Global Alternative Energy and EO 100 indices. The use of volatility-based information yielded the highest Sharpe ratio for EO Europe, followed by the Oil and Gas Exploration and Production industry, and MSCI Global Alternative Energy. We further find that a trader relying on a system which simultaneously provides momentum, trend, or volatility information would yield positive returns only for the MSCI Global Alternative Energy, the S&P Oil and Exploration and Production industry, NYSE Arca Oil, and FTSE 100 indices. Overall, despite the superior performance of the MSCI Global Alternative Energy index when using momentum and trend strategies, most region and sector EOs performed poorly compared to fossil fuel-based indices. The results suggest that the existing crude oil prices continue to allow fossil fuel-based equity investments to outperform most environmentally sustainable equity investments. These findings support that sustainable investments, on average, have yet to demonstrate consistent superior performance over non-renewable energy investments which demonstrates the need for continued, rigorous, and accommodating regulatory policy actions from government bodies in order to reorient significant capital flows towards sustainable equity investments.

Clean Energy Action Index Efficiency: An Analysis in Global Uncertainty Contexts

Climate change, the scarcity of fossil fuels, advances in clean energy, and volatility of crude oil prices have led to the recognition of clean energy as a viable alternative to dirty energy. This paper investigates the multifractal scaling behavior and efficiency of green finance markets, as well as traditional markets such as gold, crude oil, and natural gas between 1 January 2018, and 9 March 2023. To test the serial dependency (autocorrelation) and the efficient market hypothesis, in its weak form, we employed the Lo and Mackinlay test and the DFA method. The empirical findings showed that returns data series exhibit signs of (in)efficiency. Additionally, there is a negative autocorrelation among the crude oil market, the Clean Energy Fuels Index, the Global Clean Energy Index, the gold market, and the natural gas market. Arbitration strategies can be used to obtain abnormal returns, but caution should be exercised as prices may increase above their actual market value and reduce the profitability of trading. This work contributes to the body of knowledge on sustainable finance by teaching investors how to use predictive strategies on the future values of their investments.

Dynamic spillover and systemic importance analysis of global clean energy companies: A tail risk network perspective

This paper conducts tail risk spillover and systemic importance analysis based on the firm-level data of global clean energy system. The tail risk network is constructed based on the ΔCoVaR method, where the correlation is calculated from three perspectives: market, sector and institution. Moreover, the systematically important institutions are identified through a PageRank-based approach. We find that two industries contribute the largest in the risk transmission process, and most of the identified important institutions come from these industries as well. Also, it is observed that the COVID-19 pandemic and the Russia–Ukraine conflict would render different impacts on the risk contagion.

A Wavelet Analysis of the Dynamic Connectedness among Oil Prices, Green Bonds, and CO2 Emissions

Wavelet power spectrum (WPS) and wavelet coherence analyses (WCA) are used to examine the co-movements among oil prices, green bonds, and CO2 emissions on daily data from January 2014 to October 2022. The WPS results show that oil returns exhibit significant volatility at low and medium frequencies, particularly in 2014, 2019-2020, and 2022. Also, the Green Bond Index presents significant volatility at the end of 2019-2020 and the beginning of 2022 at low, medium, and high frequencies. Additionally, CO2 futures' returns present high volatility at low and medium frequencies, expressly in 2015-2016, 2018, the end of 2019-2020, and 2022. WCA's empirical findings reveal (i) that oil returns have a negative impact on the Green Bond Index in the medium term. (ii) There is a strong interdependence between oil prices and CO2 futures' returns, in short, medium, and long terms, as inferred from the time-frequency analysis. (iii) There also is evidence of strong short, medium, and long terms co-movements between the Green Bond Index and CO2 futures' returns, with the Green Bond Index leading.

A Comparative Perspective of the Effects of CO2 and Non-CO2 Greenhouse Gas Emissions on Global Solar, Wind, and Geothermal Energy Investment

Greenhouse gas emissions, including carbon dioxide and non-CO2 gases, are mainly generated by human activities such as the burning of fossil fuels, deforestation, and agriculture. These emissions disrupt the natural balance of the global ecosystem and contribute to climate change. However, by investing in renewable energy, we can help mitigate these problems by reducing greenhouse gas emissions and promoting a more sustainable future. This research utilized a panel data model to explore the impact of carbon dioxide and non-CO2 greenhouse gas emissions on global investments in renewable energy. The study analyzed data from 63 countries over the period from 1990 to 2021. Firstly, the study established a relationship between greenhouse gas emissions and clean energy investments across all countries. The findings indicated that carbon dioxide had a positive effect on clean energy investments, while non-CO2 greenhouse gas emissions had a negative impact on all three types of clean energy investments. However, the impact of flood damage as a representative of climate change on renewable energy investment was uncertain. Secondly, the study employed panel data with random effects to examine the relationship between countries with lower or higher average carbon dioxide emissions and their investments in solar, wind, and geothermal energy. The results revealed that non-CO2 greenhouse gas emissions had a positive impact on investments only in wind power in less polluted countries. On the other hand, flood damage and carbon dioxide emissions were the primary deciding factors for investments in each type of clean energy in more polluted countries.

Predictors of Clean Energy Stock Returns: An Analysis with Best Subset Regressions

We investigate the determinants of clean energy stock returns by considering a large set of variables. We focus on the Covid-19 period and use a novel statistical technique, best subset regressions with non-Gaussian errors, for variable selection. Our examination shows that clean energy stocks are significantly exposed to small company and emerging market equities, a new finding to the literature. Moreover, we find no influence from the oil market, contrary to conclusions of a large part of the prior work.

Using Landfill Sites and Marginal Lands for Socio-Economically Sustainable Biomass Production through Cultivation of Non-Food Energy Crops: An Analysis Focused on South Asia and Europe

Food security and energy transition are among the current major global environmental challenges. Although these issues individually are significant in their own right, they are connected to each other in a nexus with different interrelationships and dependencies. In the quest for non-fossil alternatives for energy, cultivation of bioenergy crops has become an important part of the energy policy in many countries. In this regard, the use of fertile agricultural land for growing crops for energy production rather than for food supply affects the global food security. Recent conflicts and the geopolitical crisis in Europe, leading to increased food, fuel, and fertiliser prices, the existing climate crisis, and the crisis caused due to the COVID-19 pandemic, have further reinforced the understanding of this nexus, with certain countries mulling limiting biofuel production from agricultural land and others banning food grain exports to safeguard food supply. The idea of growing non-food energy crops on marginal lands in general and closed landfill sites in particular is hence ever more relevant, to avoid land-use concurrence between food needs and energy needs. Landfilling has been the dominant waste management strategy until recently in European countries and is still the dominant mode of waste management in low-income regions like South Asia. This paper provides a review of the economic as well as environmental benefits of growing Ricinus communis L., Jatropha curcas L., and Populus deltoides as energy crops on closed landfill sites in the South Asian context. While as the cultivation of Miscanthus X Giganteus, Silphium perfoliatum L., and Panicum virgatum (Switchgrass) is reviewed in the European context. The cultivation of non-food energy crops like these on closed landfill sites and marginal lands is presented as a potential component of an integrated food-energy policy, with an increased relevance in the current times. In the current times of multiple crises, this measure is of increasing relevance as a part of the overall strategy to achieve resilience and environmental sustainability.

What do we know about the idiosyncratic risk of clean energy equities?

The COVID-19 pandemic stimulated the need to invest in clean energy firms for better returns and climate risk mitigation. This study provides a detailed overview of the impact of idiosyncratic risk (IVOL) on excess returns of 95 clean energy stocks. Overall, investors in clean energy stocks are guided by the pessimist group of investors who underprice the high IVOL stocks and demand high-risk premiums to diversify the firm-specific risk. Further, during the COVID-19 period, there is no significant relationship between clean energy excess stock returns and IVOL. During this period, clean energy stocks were exposed to higher information asymmetry, limiting the arbitrage opportunities and producing a weaker return-IVOL relation indicating that clean energy stocks reflect the properties of technology stocks. IVOL has a low level of persistence which may be helpful in forecasting. This study offers valuable insights for regulators and investors from the investment decisions, asset pricing, and diversification perspective.

USE OF SWINE WASTE IN THE PRODUCTION OF ELECTRIC ENERGY FROM THE EFFICIENT USE OF BIODIGESTORS: THE BRAZILIAN CASE

Objective: to calculate the minimum number of animals that a rural pig farm needs to raise so that the implementation of biodigesters to generate clean energy in the context of Brazil is financially viable. Theoretical framework: a more efficient productive farm tends to include environmentally sustainable actions, since pig farming is considered a relevant activity of environmental concerns due to the amount of manure produced, especially in an intensive system. It is in this context that several current studies have been debating the environmentally correct reuse of pig manure. Method: using interviews and exploratory searches, data were collected that projected the project's cash flow. From this, the number of animals needed for the net present value of the project to be zeroed was calculated. Also, the probabilistic scenario was designed using the Monte Carlo Simulation. Results and conclusion: for the deterministic scenario, it was calculated that 736 animals are needed for zero/null NPV and for a probabilistic scenario context with p(NPV<0) = p(IRR<TMA) = 0.2, it is necessary that the rural property has at least 840 animals. Research implications: the academic and social contribution of this work is that it can help small swine producers in their decision-making for the implementation of biodigesters. Originality/value: considering rural activities as strong polluters and the large increase in electricity tariffs seen in recent years, mainly due to severe droughts and the COVID-19 pandemic, the reuse of waste becomes increasingly important and relevant for clean and distributed energy generation. © 2023 ANPAD - Associacao Nacional de Pos-Graduacao e Pesquisa em Administracao. All rights reserved.

Actualization and Adoption of Renewable Energy Usage in Remote Communities in Canada by 2050: A Review

Remote community initiatives for renewable energy are rapidly emerging across Canada but with varying numbers, success rates, and strategies. To meet low-carbon transition goals, the need to coordinate technology deployment and long-term policy to guide the adoption is critical. Renewable resources such as wind, solar, hydro, and biomass can provide energy at a subsidized cost, create sustainable infrastructure, and provide new economic viability in social value integration. The renewable energy transition is crucial to Canada in sustaining remote and indigenous communities by providing local, clean, and low-carbon-emission energy for heat, power, and possibly transportation. This paper identified 635 renewable resources projects deployed to improve and increase electricity supply. To an extent, balancing demand within the remote and indigenous communities of Canada and highlighting sustainable renewable energy development through ownership participation within the communities is achievable before 2050 and beyond through energy efficiency and the social value of energy. The article identifies clean energy targets as mandated by the different provinces in Canada to reach net-zero GHG emissions.

Directions for Sustainable Development of China's Coal Industry in the Post-Epidemic Era

China's energy structure is dominated by fossil fuels, especially coal consumption, which accounts for a relatively high share. In January 2020, the COVID-19 outbreak affected the global coal market, and many countries experienced negative economic growth. Economic development requires energy consumption. In 2021, China set a target of peaking carbon emissions by 2030 in order to phase out the dependence of carbon emissions on economic development. Therefore, the aim of this article is to develop directions for the sustainable development of China's coal industry. Based on the macroenvironment and situation analysis, the article concludes that, under the influence of geopolitics, China's shortage of imported coal resources and China's continuous rise in coal demand, the share of coal in China's energy structure will not decrease significantly in the long-term. The main directions for the sustainable development of China's coal industry are to ensure the safety of coal energy storage and improve the level of safety supervision;coordinate the development of regional energy;increase the clean, efficient, and low-carbon utilization of coal;and strengthen international coal strategic cooperation.

Holistic and integrated systemic policies and practices for decarbonization

A bold, visionary, transforming, systemic, holistic, integrated, caring, inclusive, equitable, sustainable, and resilient paradigm for fast transitions toward a clean energy and decarbonized future is imperative and urgently needed. Business as usual and silo approaches are not viable with the changes that are occurring. These changes are linked and interacting systems of physical, natural, health, social, economic, finance, governance, and institution. The effects and impacts are dire, existential, and pervasive. The 2021 IPCC Report Physical Science Basis: Summary for Policymakers, in clear language stated "it is unequivocal that human influence has warmed the atmosphere, oceans and land”. The scientific communities in the US, Europe, Asia and other regions all subscribe to this situation. Well documented global empirical evidence is also confirming the profound systems and systemic transformations that are occurring. Business, industry, and the general public, in particular youths, worldwide are all increasingly demanding actions – that transcend words of what needs to be done to deeds of how and now. In the US, the 2022 Inflation Reduction Act, would allocate US 370 billion for combating climate change and clean energy production. The IRA is the largest climate spending package ever. President Biden has called for 100% clean electricity by 2035 and pledged to cut carbon emissions by 50%–52% below 2005 levels by the end of this decade, doubling the previous target. A decarbonized future was endorsed by Leaders at the 2021 G-7 Carbis, UK Summit. There is growing realization that the global climate change crisis requires strengthened and expanded global cooperation with new, innovative and non-bureaucratic mechanisms for collaboration. The 2021 IPCC Report summarized that global surface temperature will continue to increase until at least the mid- century under all emissions' scenarios considered. "Global warming of 1.5 and 2°C will be exceeded during the 21st century unless deep reductions in CO2 and other greenhouse gas emissions occur in the coming decades.” The UNEP and IEA contends reducing anthropogenic methane emissions will help mitigate climate change and is a cost-effective proposition. The release of methane and micro-organisms from melting of permafrost needs to be better studied and understood., The confluence of increased heat, humidity, fine particulates air pollution, water contaminants and the COVID pandemic, will exacerbate health burdens. This will have serious consequences for human wellbeing, and cascading into national and global security. With climate change, therapeutics and vaccines will not work. The article provides a brief overview of the unprecedented climate related hurricanes, storms, floods and wildfires disasters occurring in all regions of the world. It highlights of some of the key effects, impacts and consequences with current policies and practices with regard to the energy-climate conundrum. There is an imperative to change course toward a decarbonized future. A number of systemic expeditious interventions are delineated. These include actions by all on:. The* fundamental need to change behavior;*afforestation, reforestation, rehabilitation of wetlands, mangroves, wastelands and coral reefs to restore ecosystem functions which would also create significant number of employment and livelihoods' opportunities;*retrofitting existing structures to be more energy efficient, incorporate increasing renewable energy, sustainability and resiliency criteria, – to "build back better” and provide jobs;*the life cycle of food and agriculture practices need to be systemically examined to reduce adverse impacts on climate, Energy, environment and health. There are difficulties and challenges. The commensurate opportunities and benefits of a decarbonized paradigm include clean and safe jobs;healthy quality of life;and a sustained and resilient future for current and future generations. © 2023 American Institute of Chemical Engineers.

Research on the emission reduction effects of carbon trading mechanism on power industry: plant-level evidence from China

PurposeCarbon trading mechanism has been adopted to foster the green transformation of the economy on a global scale, but its effectiveness for the power industry remains controversial. Given that energy-related greenhouse gas emissions account for most of all anthropogenic emissions, this paper aims to evaluate the effectiveness of this trading mechanism at the plant level to support relevant decision-making and mechanism design.Design/methodology/approachThis paper constructs a novel spatiotemporal data set by matching satellite-based high-resolution (1 × 1 km) CO2 and PM2.5 emission data with accurate geolocation of power plants. It then applies a difference-in-differences model to analyse the impact of carbon trading mechanism on emission reduction for the power industry in China from 2007 to 2016.FindingsResults suggest that the carbon trading mechanism induces 2.7% of CO2 emission reduction and 6.7% of PM2.5 emission reduction in power plants in pilot areas on average. However, the reduction effect is significant only in coal-fired power plants but not in gas-fired power plants. Besides, the reduction effect is significant for power plants operated with different technologies and is more pronounced for those with outdated production technology, indicating the strong potential for green development of backward power plants. The reduction effect is also more intense for power plants without affiliation relationships than those affiliated with particular manufacturers.Originality/valueThis paper identifies the causal relationship between the carbon trading mechanism and emission reduction in the power industry by providing an innovative methodology for identifying plant-level emissions based on high-resolution satellite data, which has been practically absent in previous studies. It serves as a reference for stakeholders involved in detailed policy formulation and execution, including policymakers, power plant managers and green investors.

Analysis of Dynamic Connectedness Relationships among Clean Energy, Carbon Emission Allowance, and BIST Indexes

Understanding and examining energy markets correctly is crucial for stakeholders to attain maximum benefit and avoid risks. As a matter of fact, the volatility that occurred in energy markets and recent crises had major impacts on national economies. Dynamic connectedness relationships (DCRs) can make quite powerful predictions for both low-frequency data and limited time-series data. The objective of this study is to explicate the dynamic connectedness relationships among the BIST sustainability index, BIST 100 index, S&P Global Clean Energy index (S&P GCEI), and S&P GSCI carbon emission allowances (EUA). The daily data obtained over the period 11 April 2014–11 November 2022 were used for the research study. The DCRs among the variables used in the study were investigated by employing the time-varying parameter vector autoregressive (TVP-VAR) model. As a result of the study, the volatility from carbon emission allowances was determined to spill over to S&P GCEI, BIST 100, and BIST sustainability indexes. During the COVID-19 pandemic, significant reductions were detected in the volatility spillover (VS) from carbon emission allowances to S&P GCEI, BIST 100, and BIST sustainability indexes. Moreover, it was revealed that a weak VS existed from S&P GCEI to BIST sustainability and BIST 100 indexes. The findings reveal the importance of policymakers taking some incentive measures in EUA prices and also its role in portfolio diversification. © 2023 by the authors.