The Impact of Climate Policy Risk on Carbon-Emission Heterogeneous Assets: Evidence from China

This study investigates the impact of climate policy uncertainty (CPU) on the price, volatility, and dynamic correlation of heterogeneous carbon emission assets in China. Our empirical results reveal that high-carbon assets and the first group of low-carbon assets, including renewable energy, new energy, geothermal, wind power, and photovoltaic power, have significant climate-policy risk exposure. The impact of CPU on the price and volatility of the second group of low-carbon assets, which includes governance, responsibility, sustainability, hydropower, and low-carbon sectors, is either positive or insignificant. CPU can lead to a significant decrease in the correlation between high- and low-carbon assets, especially during periods of high CPU. Moreover, we identify several low-carbon assets with strong hedging performance against the risks of high-carbon assets.