Fossil energy and clean energy stock markets under COVID-19 pandemic

This paper analyses the dynamic impact of fossil energy shocks (crude oil and Natural gas) on renewable clean energy stock markets during the COVID-19 pandemic. Using a time-varying VAR model with stochastic volatilities, we conduct distinct analyses over the period from 10th March to 15th June 2020, while distinguishing between three sub-periods. Our key findings show a significant increase in the returns of clean energy stocks after the sharp collapse of crude oil prices. However, we find the opposite effect on renewable energy stock returns after the OPEC+ agreement. The results also indicate that the announcement of COVID-19 as a global pandemic caused the prices of both Natural gas and renewables to rise after a decrease. By contrast, after the crude oil shocks, there was no response of renewables to Natural gas shocks. Furthermore, the stochastic volatility reveals that after the OPEC-Russia agreements, the volatility of crude oil returns gets back to normal and steady fluctuation. Our results provide useful implications for policy-makers to mitigate the negative effects on renewable energy investments due the uncertainty related to the ongoing pandemic.