Spillover dynamics between ReFi tokens, renewable energy tokens, energy markets, and the carbon market: determinants and implications for portfolio diversification

Abstract As global efforts to address climate change continue, digital assets such as regenerative finance (ReFi) and renewable energy tokens are gaining attention in the context of financing decarbonization and clean energy investment. This study examines the connectedness between ReFi tokens, renewable energy tokens, energy, and carbon credit markets using the Quantile VAR (QVAR) model with data from October 20, 2021, to February 28, 2025. Connectedness is higher during periods of heightened market instability, such as wartime, than during stable conditions. At the median quantile, ReFi tokens and most clean energy assets act as shock transmitters, while renewable energy tokens, dirty energy assets and carbon credit assets are net recipients. In extreme quantiles, the pattern shifts with ReFi tokens acting as receivers. Portfolio analysis reveals that including ReFi and renewable energy tokens improves the diversification in energy-carbon portfolios. These results guide portfolio managers to adopt risk-adjusted strategies and policymakers to consider these tokens in regulated sustainability markets.