How can carbon markets drive the development of renewable energy sector ? Empirical evidence from China

The reduction of carbon emissions has attracted significant global attention. This paper empirically analyzes the dynamic nonlinear linkages among carbon markets, green bonds, clean energy, and electricity markets by constructing DCC-GARCH and TVP-VAR-SV models, and places the four markets under a unified framework to analyze the volatility risk from a time-varying perspective, thereby enriching the research on China's carbon market and renewable energy sector. We found that extreme events have a significant impact on the dynamic connectivity among the four markets. The analysis of the shock impact indicates that the carbon market has a positive effect on the power market in the short and medium terms, but has a mitigating impact in the long term. Especially, when the other markets are hit, the carbon market has evident fluctuation in 2020. The green bond market has a positive influence on the carbon market, whereas the power market demonstrates adverse effects in the short and medium terms. The New Energy Index negatively impacts the power market in the short and medium terms, but is expected to have a positive effect after 2020, highlighting the growing need for renewable energy in the power system transformation. According to the findings mentioned above, we put forward appropriate recommendations.