Carbon Market Risk, Green Finance Assets, and Digital Asset Spillovers: Evidence from a Quantile Connectedness Framework

Using 2143 daily observations from January 2018 to March 2026, this study examines risk transmission among European Union Allowance (EUA) prices, green-bond indices, environmental, social, and governance (ESG) equity indices, conventional financial assets, and digital assets. The empirical design combines vector autoregression with an exogenous variable and generalised forecast-error variance decomposition (VAR-X/GFEVD) for the full-sample and rolling analyses with quantile vector autoregression with an exogenous variable and GFEVD (QVAR-X/GFEVD) for the quantile-specific analysis. The preferred eight-asset VAR-X specification produces a full-sample Total Connectedness Index (TCI) of 39.31%, while the corresponding 100-day rolling VAR-X analysis produces a mean TCI of 43.03%. The rolling TCI reaches a maximum of 54.17% on 20 July 2022 and a COVID-19-period maximum of 48.80% on 8 June 2020, indicating that system-wide connectedness increases during periods of market stress. The Cboe Volatility Index (VIX), S&P 500, and ESG equity index are consistently the dominant net transmitters, whereas EUAs, Bitcoin, crude oil, and green bonds are net receivers. The EUA net-receiver position becomes less negative after 2024, but this temporal association should not be interpreted as evidence that strengthened Phase IV provisions caused greater carbon-market stability. The quantile-specific results reveal non-monotonic state dependence, with the TCI ranging from 18.28% at τ = 0.6 to 23.52% at τ = 0.4 rather than increasing uniformly toward the lower tail.