Climate risk: toppling the dominoes of the low-altitude economy industrial chain

As a strategic frontier industry, the low-altitude economy exhibits a vulnerability to climate risk that remains poorly understood. This study examines how climate physical risk and climate policy risk reshape risk interconnections across China’s low-altitude economy industrial chain. Using a TVP-VAR model on daily sectoral stock returns (2011–2023), we first quantify the intrinsic connectedness, then employ a TVP-FAVAR model to evaluate the dynamic impact of climate risk shocks. The results reveal a distinct spillover pattern characterized by strong within-segment and weak across-segment linkages: upstream software services act as the dominant net risk transmitters, key materials and components serve as net absorbers, the midstream functions as a buffer, and downstream applications are increasingly influential. A critical distinction lies in risk interconnection: physical risk induces sharp, short-lived surges in connectedness that dissipate within approximately six months, whereas policy risk generates persistent, slowly decaying spillovers that are most strongly felt downstream through compliance and expectation channels. This study offers the first granular, time-varying analysis of climate risk propagation in the low-altitude economy, providing a segment-specific empirical basis for building dynamic resilience and early-warning mechanisms.