A systemic analysis of dynamic frequency spillovers among carbon emissions trading (CET), fossil energy and sectoral stock markets: Evidence from China

The carbon emission trading (CET) market is a critical mechanism to reduce CO₂ emissions, which is connected with energy and stock markets. The existing literature mainly explores the relationship between CET market and a certain type of market as well as is limited to time-domain perspective. Using the Diebold-Yilmaz and Barunik-Krehlik methods, this work aims to systematically investigate the dynamic frequency spillovers among CET, fossil energy (coal, crude oil and natural gas) and sectoral stock markets in China. The results indicate: the total spillover is contributed by the short-term (within 1 month) spillover; the net spillovers of China's regional CET markets are almost negative and also dominated by the short-term spillovers; the net pairwise spillovers between CET and fossil energy markets are mainly negative, and the spillovers to CET markets from natural gas market are greater than from coal market since 2018; the net pairwise spillovers between CET and sectoral stock markets are almost all negative, and moreover the indices will be larger for the sectors in which the local key emitters are located; finally, the net pairwise spillover between CET and stock markets are obviously weaker than that between crude oil and stock markets.