Quantile-Based Safe Haven Analysis and Risk Interactions Between Green and Dirty Energy Futures

This study investigates whether green assets can serve as safe havens for dirty assets in the context of carbon and energy futures markets. Using daily data from April 2021 to June 2025, the analysis focuses on four key instruments: carbon emissions futures and crude oil futures, EUA futures, and natural gas futures. The study applies two main approaches—a conditional value-at-risk (CVaR)-based relative risk ratio (RRR) analysis and dynamic conditional correlation (DCC-GARCH) modeling—to assess tail risk mitigation and time-varying correlations. The results show that while green assets do not consistently act as safe havens during extreme market downturns, they can reduce the portfolio tail risk beyond certain allocation thresholds. Natural gas futures demonstrate significant volatility but offer diversification benefits when their portfolio weight exceeds 40%. EUA futures, although highly correlated with carbon emissions futures, show limited safe haven behavior. The findings challenge the assumption that green assets inherently provide downside protection and highlight the importance of strategic allocation. This research contributes to the literature by extending safe haven theory to environmental futures and offering empirical insights into the risk dynamics between green and dirty assets.