Publication: Block connectedness between the EU-ETS and corporate returns: evidence from high- and low-emission firms
Authors
Álvarez Diez, Susana ; Baixauli Soler, J. Samuel ; Lozano Reina, Gabriel ; Rodríguez-Linares Rey, Diego
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Publisher
Elsevier
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DOI
https://doi.org/10.1016/j.jcomm.2025.100511
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info:eu-repo/semantics/article
Description
Abstract
This study analyzes volatility transmission between the EU-ETS –used here as a proxy for carbon price dynamics– and the stock returns of European firms with varying emission levels during the third and fourth phases of the EU-ETS (from January 01, 2013 to April 30, 2025), applying a connectedness framework that integrates time-frequency decomposition and block-level analysis. The empirical evidence confirms that carbon market volatility significantly affects corporate financial dynamics, especially in the short term and particularly for high-emission firms. These results validate the three hypotheses posed: (i) there is statistically significant volatility connectedness between carbon and stock markets; (ii) short-term spillovers dominate; and (iii) high-emission firms are more exposed to volatility transmission than their low-emission counterparts. These findings are robust across two different classification criteria and highlight the relevance of carbon pricing not only as an environmental policy tool but also as a financial market signal.
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Citation
Journal of Commodity Markets, 2025, Vol. 40 : 100511.
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Este ítem está sujeto a una licencia Creative Commons. http://creativecommons.org/licenses/by-nc-nd/4.0/