The Contemporaneous and Lagged Spillover Effects of Carbon and Energy Markets: Focusing on the Asymmetric Impact of US–China Tensions

An innovative R2 decomposed connectedness approach is employed in this study to investigate contemporaneous and lagged linkages between carbon and energy markets. The GJR-GARCH-MIDAS model is further utilized to verify the causal impacts of US–China tensions on cross-market spillover effects. The results show that significant return and volatility spillovers exist between carbon and energy markets. In detail, return spillovers are dominated by stronger contemporaneous transmission, particularly for the Wilder Hill and S&P Clean Energy indices. In terms of volatility, the lagged effects are relatively noticeable, especially in the sectors of Renixx Clean Energy, Wilder Hill Clean Energy, and S&P Clean Energy. The analysis outcomes of dynamic spillover effects demonstrate that the spillover effects between carbon markets and energy markets have distinct characteristics and change over time. Ultimately, the paper finds that US–China tensions exert a significant asymmetric impact on the return and volatility spillover effects between carbon markets and energy markets.