Are carbon futures prices stable? New evidence during negative oil

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

doi:10.1016/j.frl.2022.102723

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 journal › Article › peer-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 language	English
Article number	102723
Journal	Finance Research Letters
Volume	47
Issue number	Part B
Early online date	25 Feb 2022
DOIs	https://doi.org/10.1016/j.frl.2022.102723
Publication status	Published - 30 Jun 2022

Keywords

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

ASJC Scopus subject areas

Finance

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10.1016/j.frl.2022.102723

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title = "Are carbon futures prices stable? New evidence during negative oil",

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.",

keywords = "Carbon emissions, COVID-19, Crude oil, Negative pricing, Supply shocks, WTI",

author = "Elena Ahonen and Shaen Corbet and Goodell, {John W.} and Samet G{\"u}nay and Charles Larkin",

year = "2022",

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AU - Ahonen, Elena

AU - Corbet, Shaen

AU - Goodell, John W.

AU - Günay, Samet

AU - Larkin, Charles

PY - 2022/6/30

Y1 - 2022/6/30

N2 - 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.

AB - 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.

KW - Carbon emissions

KW - COVID-19

KW - Crude oil

KW - Negative pricing

KW - Supply shocks

KW - WTI

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DO - 10.1016/j.frl.2022.102723

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VL - 47

JO - Finance Research Letters

JF - Finance Research Letters

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ER -

Are carbon futures prices stable? New evidence during negative oil

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Keywords

ASJC Scopus subject areas

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