A novel carbon price combination forecasting approach based on multi-source information fusion and hybrid multi-scale decomposition

Abstract

Accurate carbon price forecasting is essential to reduce carbon dioxide emissions and slow down global warming. However, a key issue in the carbon trading market is the diversity and uncertainty of external factors. Some studies began to focus on the impact of a single external factor, but few of them considered the application of multi-source information on carbon prices. In addition, the selection of the decomposition method is still controversial, making carbon price forecasting inefficient and unstable. Therefore, this paper proposes a carbon price forecasting method based on multi-source information fusion (MSIF) and hybrid multi-scale decomposition (HMSD). First, MSIF can provide complete, interactive, and timely information for raw carbon prices, including historical data, influencing factors (coal prices, oil prices), and unstructured data (Baidu index, social media sentiment). Second, HMSD is used to completely extract the internal features of multi-source information and avoid the problem of decomposition method selection. Third, due to the linear and nonlinear characteristics of carbon prices, a combination strategy based on Holt, ARIMA, SVR, BPNN, and LSTM can achieve satisfactory results. Finally, to evaluate the effectiveness of the proposed framework, seven types of comparative experiments (based on historical data, influencing factors, Baidu index, and sentiment analysis) are carried out. The results show that MSIF is superior to single-source information in improving carbon price forecasting performance. Furthermore, the HMSD is stronger than the single multi-scale decomposition method in information extraction. Therefore, the proposed hybrid framework is a state-of-the-art carbon price forecasting approach.