Does public climate attention affect the net return spillover from energy to non-energy commodities?

Abstract

This study employs the improved Diebold-Yilmaz framework with a TVP-VAR-SV model to measure the system connectivity between energy and non-energy commodities. Then, we utilize a comprehensive Public Climate Attention Index to examine the influence of public climate attention on the net spillover effects from energy to non-energy commodity markets. The empirical results demonstrate that public climate attention plays a critical role in shaping the net spillover effects from energy to non-energy commodities, with its influence varying across different dimensions of climate attention. Specifically, while physical climate attention exerts a negative effect, transition climate attention drives the positive spillovers, serving as the dominant channel of influence. When analyzing spillovers to agricultural, chemical, and metal markets, the effects of different types of climate attention are consistent across these submarkets. However, the agricultural commodity market emerges as the primary recipient of climate-related risks, acting as the main channel for the transmission of spillovers from energy markets driven by climate attention. Additionally, major events, such as the COVID-19 pandemic, will especially intensify the impact of transition climate attention on net energy spillovers. These findings provide valuable policy insights for governments, financial market regulators, and enterprises in addressing climate-related risks and their impact on commodity markets.