Market reactions to climate news: Evidence from European energy markets

This paper examines the influence of the European Climate Change News on energy markets. Using a dataset of 13 developed countries, we employ the cross-quantilogram methodology. We further apply the recursive connectedness quantification (CQ) as a robustness measure to present the spillover effects between Climate Change News and European energy market returns. We report the presence of unidirectional causality from Climate Change News towards European energy market returns. The heat map analysis reveals a heterogeneous and country-specific response of energy markets to climate-related news, suggesting that market sensitivity varies across both time and quantiles. Moreover, the recursive CQ analysis reveals distinct transition phases between the relationship between climate-related news and energy stocks, indicating shifts in investor sentiment and the evolving nature of climate discourse from opportunity-driven narratives to concerns over regulatory pressure, financial burden, and carbon compliance. Our results suggest that energy markets remain viable investments, even when climate-related news is effectively incorporated into risk assessment strategies. • This paper examines the influence of the European Climate Change News on energy markets. • We sample 13 developed countries and employ the cross-quantilogram and recursive connectedness quantification. • We report the presence of unidirectional causality from Climate Change News towards European energy market returns. • The heat map analysis reveals a heterogeneous and country-specific response of energy markets to climate-related news. • The recursive CQ analysis reveals distinct transition phases between the relationship between climate-related news and energy stocks. • Our results suggest that energy markets remain viable investments, even when climate-related news is effectively incorporated into risk assessment strategies.