Time–Frequency Spillovers and Connectedness between Chinese Climate Risk Perception and Energy Markets

Abstract With global warming becoming more and more serious, the global need for low-carbon economic transition is increasingly urgent. This study focuses on the time–frequency spillover effect of climate risk perception and energy market. By constructing transition risk perception and physical risk perception indices and using time–frequency analysis, we quantify the impact of climate risk perception on fossil energy and clean energy markets and reveal the dynamic relationship between them. The findings indicate that China’s perception of transition risk from climate change has increased since the Paris Climate Agreement, but the perception of physical risk has changed less. Moreover, the spillover effect between climate risk perception and energy markets is time varying and increases rapidly in the face of climate- or energy-related uncertain events. The COVID-19 pandemic has resulted in a sharp drop in total spillover, and there is little near-information spillover between energy markets and perceptions of climate danger. We also found that in the short term, energy market spillovers are net recipients of climate risk perception according to marginal spillover research. However, this connection changes to become a net transmitter in 2021. In the medium-to-long term, the perception of climate risk begins to function as a net transmitter of spillovers to energy markets.