Asymmetric volatility spillover effects from energy, agriculture, green bond, and financial market uncertainty on carbon market during major market crisis

While previous studies have established the influence of energy, agriculture, green bonds, and market uncertainty on carbon markets, little is known about their impacts under extreme market conditions. Addressing this gap, we investigate the downside and upside risk spillovers from these markets to European carbon markets by employing a Copula Quantile Regression model to measure the Conditional Value-at-Risk (CoVaR) and ΔCoVaR. Our findings reveal that risk spillovers are asymmetric, with downside spillovers significantly exceeding upside spillovers across all markets. Notably, the agriculture and energy sectors exhibit the most pronounced spillover effects, particularly during periods of heightened uncertainty such as Brexit, the COVID-19 pandemic, and the Russia-Ukraine war. These results provide the critical role of agriculture and energy in shaping carbon market dynamics under extreme conditions and provide valuable insights for portfolio managers and market participants aiming to enhance the resilience of carbon markets to systemic risks.