- Jiale Yan: College of Letters and Science, University of California Berkeley, 94720, USA.
- Cem Işık: Department of Economics, Faculty of Economics and Administrative Sciences Anadolu University, Eskisehir, Turkiye.
Pollution caused by environmental problems has aggravated the problem of resource scarcity, and the destruction of the ecological environment by mankind has shown serious consequences. Countries around the world are actively launching various carbon emission reduction and energy transformation policies to face this predicament. This paper investigates the risk spillover effects of China's carbon trading market with China's energy market and the U.S. energy market from the first quarter of 2018 to the first quarter of 2022. This paper uses the optimal ARMA-GARCH to fit the marginal distribution of each market and selects the optimal Copula function for the calculation of CoVaR to obtain more accurate risk measurement results. The results of this paper are as follows. First, there is a bidirectional risk spillover effect between each market in China and the U.S. At the same time, the risk spillover is time-varying, and the extreme return brings more risk. Second, the overall trend of risk spillover from China's carbon market to the U.S.-China energy market has not increased significantly, but the risk of China's energy market to China's carbon market has increased significantly over time. Third, the risk spillover situation in China's carbon trading market is not smooth. Compared to the energy market, it is also more prone to violent reactions in the face of risks. This paper provides policy recommendations to promote the coordinated development of energy and carbon markets.