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Asymmetric effects of oil shocks on carbon allowance price: Evidence from China

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  • Zheng, Yan
  • Zhou, Min
  • Wen, Fenghua

Abstract

This paper investigates the asymmetric relationship between oil shocks and the carbon emission trading market in China using the nonlinear autoregressive distributed lag (NARDL) model. The results show that: oil shocks have a long-run asymmetric effect on carbon allowance prices, and the oil supply shock is the main factor causing carbon allowance price changes in 2013–2020. The oil supply shock and oil demand shock cause the price of carbon allowances to rise, and the oil risk shock causes the price of carbon allowances to decrease. Moreover, we consider the impact of establishing a unified carbon market in 2017. We find that the main factors affecting carbon allowances' price have changed from oil demand shocks to oil supply shocks. This provides a meaningful reference for the establishment and improvement of China's carbon trading market.

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  • Zheng, Yan & Zhou, Min & Wen, Fenghua, 2021. "Asymmetric effects of oil shocks on carbon allowance price: Evidence from China," Energy Economics, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:eneeco:v:97:y:2021:i:c:s0140988321000888
    DOI: 10.1016/j.eneco.2021.105183
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    More about this item

    Keywords

    Carbon emission trading market; Oil shocks; NARDL model; Asymmetric relationship;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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