Crisis-regime spillovers’ contractedness of green and non-green cryptocurrencies and carbon market resilience under global asymmetrical disruptions

Abstract

The aim of this article is to analyse the complex contractedness and interaction between environmentally efficient (green) and energy-intensive (non-green) cryptocurrencies and carbon markets during major global crises, with a focus on implications for carbon market stability and sustainable portfolio design. Based on climate finance and transition-risk perspectives, the analysis focuses on the environmental impact of digital assets and the transmission of volatility to carbon markets during periods of systemic disruption. Using daily data covering the COVID-19 pandemic, the Russia–Ukraine war, and the Israel–Gaza conflict, the research applies the Diebold–Yilmaz spillover framework within the Markov regime-switching models to assess the time-varying volatility transmission and crisis-specific regime shifts. The results show that cross-market interconnectedness reaches its highest level during the pandemic (76.68%) and declines during subsequent geopolitical conflicts, reflecting changes in global liquidity conditions, investor sentiment, and the synchronization of shocks. Green cryptocurrencies display diverse patterns: some generate lower average spillovers, while others, such as ALGO, become significant transmitters of volatility under stress. The study contributes to the emerging literature by differentiating spillover effects according to the environmental classification of crypto assets, adopting a multi-crisis and regime-dependent analytical perspective, and linking volatility transmission to climate policy dynamics and ESG-related financial mechanisms.