NAVIGATING US CLIMATE POLICY UNCERTAINTY: NOVEL EVIDENCE FROM CARBON MARKETS, CRYPTOCURRENCY (DeFi), AND RENEWABLE ENERGY INNOVATIONS

Abstract

The aim of this study is to reveal the dynamics between climate policy uncertainty (CPU) and S&P Global Carbon Credit Index (CARBON), S&P Cryptocurrency DeFi Index (DeFi), and WilderHill New Energy Global Innovation Index (NEX) using data from December 2017 to March 2024 in the US. Fourier Bootstrap ARDL, Fourier Bootstrap quantile causality, and KRLS methods are used in the study. The findings reveal that there is a negative relationship between the CARBON and the CPU index in the long term. Although the DeFi does not have a statistically significant effect in the long term, it reveals that it has a negative effect on the CPU index in the short term. In contrast, the NEX has a positive relationship with the CPU index in both the short and long term. Moreover, there is a U-shaped non-linear relationship between the NEX and the CPU index, which weakens in moderate climate uncertainties and strengthens again in high uncertainty. Considering the causality results, there exists a causality from CARBON to CPU in the 2nd, 3rd, and 4th quantiles, and from CPU to CARBON in the 2nd and 3rd quantiles. Additionally, there is a causality from DeFi to CPU in the 8th quantile and from CPU to DeFi in the 1st quantile. Finally, there is a causal relationship from NEX to CPU in the 2nd, 3rd, 4th, and 5th quantiles and from CPU to NEX in the 9th quantile.