Research on the spillover effect among China's domestic carbon emission trading markets

Ying Shen, Yanfen Liang and Mei Yang

Renewable and Sustainable Energy Reviews, 2025, vol. 214, issue C

Abstract: China currently has a coexisting but unstable state of a national and multiple local carbon markets. As the national market expands, business may shift from locals to the national one, intensifying local markets' competition. Analyzing spillovers among carbon markets aids in understanding interactions and assessing importance, facilitating a streamlined, clearly positioned carbon market system. This study employ daily frequency data spanning from the establishment dates to August 2023 of seven carbon emission trading markets, calculates the spillover effects of carbon price return with the time-varying parameter vector autoregression spillover index model. The main conclusions are as follows: (i) The carbon price spillover effect among China's carbon emission trading markets exhibits asymmetric characteristics. Among the sampled carbon emission trading markets, Shenzhen and Hubei lead with high spillovers, influencing others. Shanghai and Beijing mainly receive spillovers, acting as price acceptors. (ii) Domestic carbon markets' price spillovers vary over time, with Guangdong and Hubei consistently showing strong correlations. (iii) New carbon market launches trigger jumps in spillover indices, which gradually stabilize to minor fluctuations.

Keywords: Carbon emission trading market; Carbon price return; TVP-VAR-DY model; Spillover effect (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.rser.2025.115506

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