This paper investigates multiple shocks from climate policy uncertainty (CPU) and green finance (GF) to carbon prices (CAPs) using the joint impulse response function (jIRF) method. The empirical findings indicate that jIRF estimates of CPU and GF on CAPs are more accurate compared to the simple sum of generalized impulse response functions, primarily due to the consideration of cross-correlations among simultaneous shocks. This highlights GF’s potential to alleviate the effects of CPU over the entire study period. Moreover, this study focuses on the post-pandemic era and reveals a positive association between GF and CAPs, indicating the evolving role of ecological governance. A key contribution lies in the introduction of the jIRF, which captures the interdependencies among concurrent shocks and underscores the evolving role of GF both before and after the COVID-19 pandemic. This study enhances the theoretical foundation of GF by illustrating its adaptation to changing macroeconomic conditions. Consequently, this study underscores the imperative for China to sustain economic growth, ensure consistency in climate policies, and bolster market-oriented reforms in green financing and carbon markets.
Shu et al. (Mon,) studied this question.