Research on the Spillover Effect of China’s Carbon Market from the Perspective of Regional Cooperation

Jing Liu, Xin Ding, Xiaoqian Song, Tao Dong, Aiwen Zhao and Mi Tan
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Jing Liu: School of Economic, Shandong Technology and Business University, Yantai 264000, China
Xin Ding: Department of Economic Management, Linyi Vocational University of Science and Technology, Linyi 276000, China
Xiaoqian Song: China Institute of Urban Governance, Shanghai Jiao Tong University, Shanghai 200030, China
Tao Dong: School of Economic, Shandong Technology and Business University, Yantai 264000, China
Aiwen Zhao: College of Finance, Institute of High-Quality Development in Huaihai Economic Zone, Xuzhou University of Technology, Xuzhou 221018, China
Mi Tan: School of Business, Macau University of Science and Technology, Macau 999078, China

Energies, 2023, vol. 16, issue 2, 1-17

Abstract: After the official launch of China’s unified carbon market, the potential for carbon emission reduction is huge. The pilot regional markets urgently need to be connected with the national carbon market to form a regional synergy and linkage mechanism and further promote the development of a unified carbon market. Spillover effects can be used to analyze the interaction between multiple markets. In this context, this study focuses on the overall spillover relationship among regional carbon trading markets. Using the VAR-GARCH-BEKK model and social network analysis (SNA), this study empirically analyzes the mean spillover effect and volatility spillover effect of regional carbon markets, and it establishes a spillover network between markets. The results show that the spillover effect of China’s regional carbon markets is widespread. Among them, the mean spillover effect is weak, and the impact period is short;. The volatility spillover effect is strong and has various directions; the spillover network connection between regional carbon markets is strong, but the spillover intensity is weak. Spillover effects will spread to the overall carbon market through information spillover paths and risk spillover paths. The stronger spillover effect and the stronger linkage between markets can bring more resource integration and unified supervision. Finally, we put forward policy recommendations, such as improving the carbon market mechanism and enhancing the maturity of carbon market development, increasing the participation and activity of the carbon market to encourage more participants to join the carbon market, improving the institutional system of the carbon market, and effectively supervising the process of information and risk spillover between carbon markets.

Keywords: carbon trading market; spillover effect; VAR-GARCH-BEKK; social network analysis; collaborative development (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
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