Climate Change, Decarbonization Investment, Decomposed Oil Shocks, and Carbon Vix: Evidence from Quantile-on-Quantile Kernel Regularized Least Squares and Wavelets Quantile-on-Quantile Regression

This study investigates the dynamic, scale, and asymmetric relationships among climate change, decarbonization investment, Carbon Vix, and Decomposed Oil Shocks, applying the Quantile-on-Quantile Kernel Regularized Least Squares (QQKRLS), Wavelets Quantile-on-Quantile Regression (WQQR), Wavelets Quantile Causality (WQC), and Quantile Cointegration Analysis (QCA). The quantile cointegration results affirm the long-run equilibrium linkages between climate change and decomposed oil shocks, carbon VIX, and decarbonization investment, primarily in the medium quantiles. The QQKRLS results indicate that the impacts are positive and significant, confined to the upper quantiles (0.70th-0.95th), for the demand shock on climate change due to fossil fuel consumption, production, and emissions. The results also confirm that the supply energy shock positively and strongly affects the climate. On the contrary, carbon uncertainty and decarbonization negatively impact climate change, indicating their potential to reduce its effects, particularly in the medium quantiles. Results from the WQC confirm that energy and carbon variables cause climate change in different quantile-frequent domains. The findings offer new insights into the environmental implications for policymakers and energy stakeholders.