Carbon price forecasting system based on error correction and divide-conquer strategies

Abstract

Carbon price forecasting is an important component of a sound carbon price market mechanism. The accurate prediction of carbon prices is an active topic of research. However, many previous studies have focused on the application of a single model, ignoring the application of combination strategies. In this study, a hybrid forecasting system that includes error correction strategy and divide-conquer strategy is designed to predict the carbon price series accurately. Specifically, the main framework of this article comprises four modules. Data preprocessing module of the divide and conquer strategy is proposed. Next, the optimization module uses a multi-objective grasshopper optimization algorithm to enhance the performance of the prediction module. Then, the error correction module predicts the error sequence and corrects the model results. To verify the performance of the established hybrid forecasting system, experiments were performed using two real carbon price series from China and European Union emissions trading schemes, and the results showed that the mean absolute percentage errors of the system were 2.7793% and 0.6720%, respectively, which are better than the other benchmark methods considered. Moreover, it was proved that the designed forecasting system provides a new, effective, and feasible solution for carbon price forecasting.