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Price Dynamics and Interactions between the Chinese and European Carbon Emission Trading Markets

Author

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  • Qiyun Cheng

    (Energy Development Research Institute, China Southern Power Grid, Guangzhou 510623, China
    These authors contributed equally to this work.)

  • Huiting Qiao

    (Energy Development Research Institute, China Southern Power Grid, Guangzhou 510623, China
    These authors contributed equally to this work.)

  • Yimiao Gu

    (Department of Electronic Business, South China University of Technology, Guangzhou 510640, China
    These authors contributed equally to this work.)

  • Zhenxi Chen

    (School of Economics and Finance, South China University of Technology, Guangzhou 510640, China
    These authors contributed equally to this work.)

Abstract

The European carbon emission trading market is the largest and most mature market, while China’s carbon market has a short history. Institutionally, cross-market transaction is infeasible between the two markets. This paper investigates the long-run trend between the two markets as well as the price dynamics. Results show that a long-run trend exists between the Chinese and European carbon markets. Both markets possess self-correction capability in reducing price deviations, signaling a certain level of market efficiency. However, both markets also exhibit pricing inefficiency as historical price movements are able to impact prices. The European market informationally leads the Chinese market. Policy implications are that China should further upgrade its information disclosure system, such as unifying information disclosure standards across industries, and further develop its carbon derivatives markets to improve market transparency and market competition.

Suggested Citation

  • Qiyun Cheng & Huiting Qiao & Yimiao Gu & Zhenxi Chen, 2023. "Price Dynamics and Interactions between the Chinese and European Carbon Emission Trading Markets," Energies, MDPI, vol. 16(4), pages 1-12, February.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:4:p:1624-:d:1059724
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    References listed on IDEAS

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    1. Jing Deng & Yujie Zheng & Yun Zhang & Cheng Liu & Huanxue Pan, 2023. "Dynamic Spillovers between Carbon Price and Power Sector Returns in China: A Network-Based Analysis before and after Launching National Carbon Emissions Trading Market," Energies, MDPI, vol. 16(14), pages 1-27, July.
    2. Li, Zhihui & Tian, Yun, 2024. "Skewed multifractal cross-correlation between price and volume during the COVID-19 pandemic: Evidence from China and European carbon markets," Applied Energy, Elsevier, vol. 371(C).

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