Climate Risks and the Connectedness between Clean and Dirty Energy Markets

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Climate risks pose significant challenges and threats to complex energy market system. This paper illuminates the interactions between clean and dirty energy markets and further investigates their asymmetric responses to climate risks. The influence of climate risks extends beyond extreme values and has a substantial impact on the overall distribution of the connectedness between clean and dirty energy markets. As the physical risk intensifies, the connectedness within both clean and dirty energy markets increases. The abnormal transition risk will render energy market fluctuations more uncertain and accentuate the distinction between clean and dirty energy markets.