The information spillover between carbon price and power sector returns: Evidence from the major European electricity companies. (20th January 2019)

• Record Type: Journal Article
• Authors: Ji, Qiang; Xia, Tongshui; Liu, Fan; Xu, Jin-Hua
• Is Part Of: Journal of cleaner production. Volume 208(2019)
• Page Start: 1178
• Page End: 1187
• Publication Date: 2019-01-20
• Subjects: EU ETS -- Carbon price -- Electricity sector -- Connectedness network; Factory and trade waste -- Management -- Periodicals; Manufactures -- Environmental aspects -- Periodicals; Déchets industriels -- Gestion -- Périodiques; Usines -- Aspect de l'environnement -- Périodiques; 628.5
• DOI: 10.1016/j.jclepro.2018.10.167
• Languages: English
• ISSNs: 0959-6526

Abstract

Abstract: This paper investigates the information spillover between carbon price returns and 18 top European electricity companies' stock returns using a connectedness network approach. Our findings show that there is strong information interdependence between carbon price returns and electricity stock returns, as evidenced by a high total connectedness index. In our constructed carbon-electricity market system, the carbon market behaves as an information recipient, receiving varying degrees of information spillover from various power enterprises. Large electricity companies tend to contribute more information to the system than small ones. In addition, our dynamic results show a high, but also volatile, spillover index, which can be a result of changes to the carbon market situation and the financial markets' stability. Finally, an asymmetric effect can be identified when comparing the difference between negative and positive return connectedness networks. Highlights: Information spillover between carbon returns and European electricity companies' stock returns is studied. There is strong information interdependence between carbon returns and electricity stock returns. The carbon market behaves as an information recipient, receiving varying degrees of information spillover. Large electricity companies tend to contribute more information to the system than small ones.