Abstract
The emission trading scheme (ETS) has become a significant tool to solve the climate change problem. China has built domestic carbon trading pilots to control energy consumption and reduce emissions. This paper explores the linkage between the carbon market and covered corporate value in China. To address the relationship, this paper estimates the impact that the carbon prices of different pilots in China have on the value of thermal listed enterprises and the extent of this impact. By using weekly data from July 2014 to June 2017, we analyze the overall effect and perform a comparative study of influences of the three trading years. Moreover, we test if the effect of carbon trading pilots on electricity corporate value is market-specific. The results demonstrate that carbon prices have a significantly negative impact on stock value when looking at the full sample and the effects vary between markets.
Highlights
As one of the fastest-growing economies, China has become the largest energy consuming and Greenhouse Gas (GHG) emitting country in the world
The results indicate that the sensitivity of corporate value changes to the carbon prices is variable depending on trading year
The reason for the carbon market-specific effect may be due to the specific carbon trading development principles, such as relative allowance allocation, carbon prices volatility, trading turnover, etc
Summary
As one of the fastest-growing economies, China has become the largest energy consuming and Greenhouse Gas (GHG) emitting country in the world. In 2016, China emitted 9.15 billion tons of CO2, accounting for 27.3% of the world [2]. GHG emissions are the main cause of global warming and climate change. In response to global climate change, in 2010 China signed the Copenhagen accord and promised that by 2020 the unit of gross domestic product (GDP) of carbon dioxide emissions would have reduced by 40% to 45% lower than 2005 [3]. Carbon pilots in China covered approximately 1.2 billion tons of CO2, following the EU emission trading scheme (ETS), becoming the second largest carbon emission trading system
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