Price dynamics and forecasting of China's Tradable green Certificates: An analysis of linkages with the carbon emissions trading market

Yubao Wang, Huiyuan Pan, Rongyu Cao and Boyang Xu

Energy Policy, 2025, vol. 206, issue C

Abstract: Against the backdrop of China's “dual carbon” goals, the Tradable Green Certificate (TGC) market and the Carbon Emissions Trading (CET) market are vital for promoting a cleaner energy structure. Understanding their price interactions is crucial for effective policy design. This study first develops a market equilibrium model that accounts for differences in supply and demand elasticities to examine the relationship between TGC and CET prices, followed by an empirical analysis using a bivariate DCC-GARCH(1,1) model. Furthermore, the research employs machine learning techniques (Random Forest and XGBoost) alongside the ARIMA model to forecast TGC prices, and utilizes the Diebold-Yilmaz spillover index to analyze risk spillover effects between the TGC market and other related markets. The findings reveal: (1) A weak negative correlation (average of −0.061) exists between TGC and CET prices, with analysis suggesting rising CET prices impact TGC supply-demand dynamics and can lead to lower TGC prices under certain elasticity conditions. (2) Machine learning models outperform the ARIMA model in capturing the dynamic fluctuations and forecasting TGC prices. (3) TGC prices are notably influenced by energy markets and international financial markets. (4) The TGC market is a net risk recipient (net spillover effect of −0.100).

Keywords: Tradable green certificate (TGC); Carbon emissions trading (CET); Price relationship; Price forecasting; Machine learning (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421525002745
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:206:y:2025:i:c:s0301421525002745

DOI: 10.1016/j.enpol.2025.114767

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().