Tail-Risk Spillovers in Strategic Commodity and Carbon Markets: Evidence for Natural Resource Risk Management

Commodity and carbon markets are central to natural resource allocation, energy security, and the effectiveness of carbon-pricing policies, yet their risk linkages can intensify sharply during crises. This study examines nonlinear, tail-dependent volatility spillovers across strategically important resource markets using a Quantile-on-Quantile connectedness framework. We employ weekly observed data from 3 January 2010 to 27 April 2025 for eleven futures markets spanning metals (copper, silver, gold), energy (WTI crude oil, heating oil, natural gas, gasoline), agricultural commodities (sugar, coffee, corn), and carbon emissions. Volatility is measured using GARCH-based estimates and embedded in quantile VAR dynamics to map state-contingent shock transmission across the distribution. The results indicate strong asymmetries: connectedness rises markedly in tail regimes and attains its highest levels during the COVID-19 pandemic and the Russia–Ukraine war, relative to the 2015–2016 energy market adjustment. Heating oil, gold, and natural gas frequently act as key volatility transmitters, while the carbon market shifts from a peripheral receiver to a more integrated and sometimes systemic node within the broader commodity risk network. The findings indicate that carbon-price risk propagates through resource markets in a regime-dependent manner, with implications for stress testing, tail-sensitive hedging, and the coordination of resource and climate policy under turbulent market states.