J Environ Manage. 2025 May 3:125549. doi: 10.1016/j.jenvman.2025.125549. Online ahead of print.
ABSTRACT
In the new era of high-quality economic development, the digital economy presents new opportunities for China to achieve low-carbon transformation and enhance environmental protection. This paper analyzes daily data from January 3, 2019, to March 25, 2025, employing the variational mode decomposition (VMD) algorithm to separate China’s digital economy, environmental protection, and carbon neutrality markets into long-term, short-term, and disturbance-term components. Furthermore, this study utilizes a model-free connectedness approach to investigate spillover effects and portfolio strategies among these three markets. The results reveal strong spillovers between the digital economy, environmental protection, and carbon neutrality markets, with the long-term spillover from carbon neutrality to the digital economy being the most pronounced. The spillover network indicates that carbon neutrality is the source, environmental protection is the recipient, and the digital economy is the intermediary. These spillovers are time-varying; short-term and disturbance-term effects significantly intensified with the emergence of ChatGPT and generative AI technologies. Additionally, the portfolio strategies demonstrate that the digital economy offers lower hedging costs and high efficiency in addressing short-term and disturbance-term effects. Conversely, carbon neutrality proves to be a more effective long-term hedging tool. Moreover, this study suggests that long-term strategies are a better benchmark during rising returns. In contrast, a disturbance-term hedging strategy is recommended for managing non-systemic risks during declining portfolio return phases. The findings provide practical guidance for asset allocation and risk management in the digital, environmental, and carbon sectors.
PMID:41176431 | DOI:10.1016/j.jenvman.2025.125549
