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

Qiyun Cheng, Huiting Qiao, Yimiao Gu and Zhenxi Chen ()
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Qiyun Cheng: Energy Development Research Institute, China Southern Power Grid, Guangzhou 510623, China
Huiting Qiao: Energy Development Research Institute, China Southern Power Grid, Guangzhou 510623, China
Yimiao Gu: Department of Electronic Business, South China University of Technology, Guangzhou 510640, China
Zhenxi Chen: School of Economics and Finance, South China University of Technology, Guangzhou 510640, China

Energies, 2023, vol. 16, issue 4, 1-12

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.

Keywords: carbon market; long-run trend; price dynamics; European ETS; Chinese ETS (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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