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Interaction among China carbon emission trading markets: Nonlinear Granger causality and time-varying effect

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  • Zhao, Lili
  • Wen, Fenghua
  • Wang, Xiong

Abstract

China makes great efforts to reduce carbon emissions and mitigate global greenhouse gas. In order to identify the interaction among China CET markets, this paper comprehensively investigates nonlinear Granger causality and time-varying effect in markets by using the Hiemstra and Jones (HJ) test, Diks and Panchenko (DP) test and time-varying parameter structure vector autoregressive (TVP-SVAR) model. The empirical analysis has demonstrated China major CET markets significantly bidirectional nonlinear Granger cause each other. As to time-varying effect, we have obtained convincing findings that time-varying impulse responses are among China major CET markets in the short term. Specifically, Guangdong, Hubei and Shenzhen CET markets are time-varying co-movement, negatively or positively related to each other over time, implying there are deep bases for China national CET market construction. Furthermore, the specific time point impulse effects support our discoveries in time-varying impulse responses.

Suggested Citation

  • Zhao, Lili & Wen, Fenghua & Wang, Xiong, 2020. "Interaction among China carbon emission trading markets: Nonlinear Granger causality and time-varying effect," Energy Economics, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:eneeco:v:91:y:2020:i:c:s0140988320302413
    DOI: 10.1016/j.eneco.2020.104901
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