Dynamic Spillovers and Asymmetric Spillover Effect between the Carbon Emission Trading Market, Fossil Energy Market, and New Energy Stock Market in China

Dan Nie,Xiyu Li,Yanbin Li

doi:10.3390/en14196438

Dan Nie, Xiyu Li + Show 1 more

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https://doi.org/10.3390/en14196438

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Abstract

In 2020, China proposed the goal of achieving carbon emission peaks by 2030 and carbon neutrality by 2060. For China, whose energy consumption structure has long been dominated by fossil energy, carbon trading and new energy are crucial for the realization of the emission target. By establishing a connectedness network model, this paper studies the static and dynamic spillovers between the Hubei carbon trading market, new energy stock market, crude oil market, coal market, and natural gas market in China, and draws the following conclusions: (1) the static spillover index of the carbon–energy–stock system is 3.57% and the dynamic spillover index fluctuates between 7.67% and 22.62%, indicating that the spillover effect of the system is low; (2) for the whole system, whether from a static or dynamic perspective, the carbon market always plays the role of net information receiver, while new energy is the net information transmitter; (3) the new energy stock market and the coal market always act as net information transmitters to the carbon market; and (4) the spillover effect of the system is asymmetric, wherein the system is more sensitive to negative information about price returns, and this asymmetry is much greater when the system is active.

Highlights

IntroductionClimate change and energy shortages have become global problems. To better control greenhouse gas emissions and improve energy efficiency, the European Union (EU) took the lead in introducing the Emission Trading Scheme (ETS) in 2005 [1]
In recent years, climate change and energy shortages have become global problems
The structure of the remainder of this paper is as follows: Section 2 introduces the connectedness network model; Section 3 explains the contents of the variables and the source of the data, and makes a preliminary analysis of the original data; in Section 4, we investigate the spillover from the static and dynamic perspectives of the carbon–energy– stock connectedness network and analyze the asymmetry of the spillover effect; lastly, Section 5 summarizes the main findings of this paper and makes recommendations for policy-makers and market investors

Summary

Introduction

Climate change and energy shortages have become global problems. To better control greenhouse gas emissions and improve energy efficiency, the European Union (EU) took the lead in introducing the Emission Trading Scheme (ETS) in 2005 [1]. It is worth mentioning that China’s ETS has rapidly developed in recent years and the role of China’s carbon trading market in promoting global carbon emission reduction has gradually emerged. As the world’s largest developing country and second largest economy, China is the world’s largest consumer of energy production and has been working hard in recent years to fulfill its carbon emission reduction commitments. By the end of 2020, China has achieved a 48% reduction in carbon emission intensity compared with 2005 [4]. In order to achieve the emission reduction target, China has been actively exploring the construction of a carbon trading market in recent years. China has become the first developing country among the world’s major emitters to set a carbon neutral deadline. The further improvement of the construction of the carbon trading market is essential for China to achieve its emission reduction goals and for the global carbon emission reduction process

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