Extreme risk connection among the European Tourism, energy and carbon emission markets

This article presents a novel examination of the risk connectedness patterns and causality relationships between European Tourism and the Energy and Carbon Emissions Market. The findings indicate that the risk connectedness between European Tourism and the Energy and Carbon Emissions Market exhibits asymmetric characteristics, displaying weaker connectedness in median and high states compared to normal market conditions. Notably, connectedness is more pronounced in extreme tail cases. Additionally, the European Tourism Sector Index is less susceptible to risks in the European Energy and Carbon Emissions market during bear markets. Furthermore, Rotterdam Coal Futures and Dutch TTF Natural Gas Futures contribute significantly to the volatility connectedness of the European Tourism Sector Index. The findings of the quantile Granger causality test confirmed the existence of causality between the European Tourism Index and the European Energy and Carbon Markets across all market states. • First study on risk connectedness between European Tourism and Energy & Carbon Markets. • Higher tail connectedness observed compared to normal market conditions. • Tourism sector shows reduced risk exposure to energy markets during bear markets. • Coal and Gas futures show strong volatility linkages with Tourism Index. • Bidirectional causality exists between Tourism and Energy & Carbon Markets.