From pandemics to conflicts: Analyzing time-frequency spillover between carbon emission allowance and metals via...

The extraction and processing of precious and non-precious metals have detrimental environmental impacts. Despite this significant impact, lack of litrature about the complex linkage between metals and carbon emissions allowances (CEA), an important mechanism for controlling industrial carbon footprint. This study investigates the dynamic connectedness and co-movement among precious metals (gold, silver, platinum, and palladium), non-precious metals (aluminium, zinc, copper, lead, nickel, iron ore, tin), and CEA during major recent events, i.e., COVID-19, the Russia-Ukraine war, and the Israel-Hamas-Iran conflict. This study employs the TVP-VAR-BK to uncover time-frequency spillovers and partial wavelet coherence to reveal lead-lag dynamics and co-movement between the CEA and metal markets. Based on the TVP-VAR-BK results, the Russia-Ukraine war generated the highest net return spillover: 60.63% over the whole period, 12.18% over the long period, and 48.45% over the short period. This was followed by the Israel-Hamas-Iran conflict, with net spillover of 56.36%, 6.78%, and 49.59%, while COVID-19 showed 51.88% in the full period, 6.06% in the long period, and 45.83% in the short period. The analysis indicates that CEA consistently acted as a net receiver of spillovers in major panels during each of the three crises. Furthermore, copper is identified as the primary shock transmitter, while iron ore is found to be the shock receiver during all crises. Finally, wavelet coherence and partial wavelet coherence results revealed a complex lead-lag and coherence relationship among these metals and their co-movement with carbon emission allowance markets.