Climate policy uncertainty and gas markets in transition

Omri I., Almustafa H., Galariotis E., Özçelebi O., Guesmi K.

ECONOMICS LETTERS, vol.264, 2026 (SSCI, Scopus) identifier identifier

  • Publication Type: Article / Article
  • Volume: 264
  • Publication Date: 2026
  • Doi Number: 10.1016/j.econlet.2026.112959
  • Journal Name: ECONOMICS LETTERS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM, EconLit, MathSciNet, Public Affairs Index, zbMATH
  • Istanbul University Affiliated: Yes

Abstract

This paper studies how climate policy uncertainty (CPU) and CO2 emissions shape returns in gas-related financial markets. We combine quantile-on-quantile regression with wavelet quantile and rolling-window wavelet quantile correlation to capture nonlinearities, tail dependence, and horizon-specific effects. The results reveal pronounced asymmetries and strong regime dependence. CPU does not exert a uniform directional effect; instead, it amplifies dispersion and tail sensitivity, particularly under extreme market conditions. CO2 tend to depress the NYSE Arca Natural Gas Index and London Gas Oil futures, but can support the S&P 500 Energy Index under specific market states, consistent with heterogeneous transition expectations. Crisis episodes intensify time-frequency linkages and can flip correlation signs at medium and long horizons. Overall, the results indicate that elevated CPU amplifies risk-premium adjustments in a state-dependent manner, strengthening regime sensitivity in gas-related financial markets.