Are carbon futures prices stable? New evidence during negative oil

Elena Ahonen, Shaen Corbet, John W. Goodell, Samet Günay, Charles Larkin

Research output: Contribution to journalArticlepeer-review

Abstract

We investigate volatility spillovers from West Texas Intermediate (WTI) crude oil to carbon emission allowance futures, focusing on the period surrounding the WTI negative pricing event of April 2020. Results evidence, pre-negative WTI, a doubling of directional spillover from WTI oil to carbon allowance futures upon the global spread of COVID-19, with a sharp elevation of directional spillover from WTI oil to carbon allowances during the specific period of negative WTI. This extraordinary rise in directional spillover continued past the near-term contract through several ensuing contracts. Results suggest that carbon futures markets are highly sensitive to periods of fragility.

Original languageEnglish
Article number102723
JournalFinance Research Letters
Volume47
Issue numberPart B
Early online date25 Feb 2022
DOIs
Publication statusPublished - 30 Jun 2022

Keywords

  • Carbon emissions
  • COVID-19
  • Crude oil
  • Negative pricing
  • Supply shocks
  • WTI

ASJC Scopus subject areas

  • Finance

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