Risk Spillover Effects in Energy Markets Under Climate Change: Evidence from the Chinese Market

To ascertain the impact of climate change on risk spillovers in energy markets, the vector autoregressive (VAR) model and the impulse response function (IRF) were utilized to analyze risk spillover effects in China’s energy markets between 2007 and 2023. The findings indicated that the risk spillover from climate change in China’s energy markets is characterized by asymmetric and time-varying characteristics. A substantial degree of heterogeneity exists among distinct energy markets. Climate physical risk has a detrimental effect on risk spillovers in energy markets, while transition risk has a positive impact on risk spillover in fuel, LPG, and natural gas markets, and a negative effect on risk spillover in alcohol, gasoline, and diesel markets.