Impact of Climate Policy Uncertainty, Clean Energy Index, and Carbon Emission Allowance Prices on Bitcoin Returns

Abstract

This research aimed to investigate the relationship between climate policy uncertainty (CPU), clean energy (ENERGY), carbon emission allowance prices (CARBON), and Bitcoin returns (BTC) for the period from August 2012 to August 2022. The empirical analysis strategies utilized in this study included the Fourier Bootstrap ARDL long-term coefficient estimator, the Fourier Granger Causality, and the Fourier Toda–Yamamoto Causality methods. Following the confirmation of cointegration among the variables, we observed a positive relationship between BTC and CARBON, a positive relationship between BTC and CPU, and a negative relationship between BTC and ENERGY. In terms of causal associations, we identified one-way causality running from CARBON to BTC, BTC to CPU, and BTC to the ENERGY variable. The study underscores the potential benefits and revenue opportunities for investors seeking diversified investment strategies in light of climate change concerns. Furthermore, it suggests actionable strategies for policymakers, such as implementing carbon taxes and educational campaigns, to foster a transition towards clean energy sources within the cryptocurrency mining sector and thereby mitigate environmental impacts.