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Abstract
In recent years, the rapid increase in CO2 concentration has accelerated global warming. As a result, sea levels rise, glaciers melt, extreme weather occurs, and species become extinct. As the world’s largest CO2 emission rights trading market, EU Emissions Trading System (EU-ETS) has reached 1.855 billion tons of quotas by 2019, influencing the development of the global carbon emission market. Crude oil, as one of the major fossil energy sources in the world, its price fluctuation is bound to affect the price of carbon emission rights. Therefore, this paper aims to reveal the correlation between crude oil futures prices and carbon emission rights futures prices by studying the price fluctuation. In this paper, the linkage between West Texas Intermediate (WTI) crude oil futures prices and European carbon futures prices was investigated. In addition, this paper selects continuous data of WTI crude oil futures prices and spot prices with European carbon futures prices from January 8, 2018 to November 27, 2020, and builds a smooth transformation regression (STR) model. The relationship between crude oil futures and carbon futures prices is studied in both forward and reversal linkage through empirical analysis. The results show that crude oil futures prices and carbon futures prices have a mutual effect on each other, and both linear and nonlinear correlations between the two prices exist. Based on the results of this research, some suggestions are provided.
Highlights
The global economy developed rapidly after the outbreak of the Industrial Revolution, and a large amount of energy consumption coming along, including coal, oil, and natural gas
This paper provides a theoretical basis for developing countries to reduce carbon emissions by means of carbon emission trading
The correlation between the crude oil and carbon product price can be transmitted through the futures market transaction and reflected in the corresponding price in the futures bottle
Summary
The global economy developed rapidly after the outbreak of the Industrial Revolution, and a large amount of energy consumption coming along, including coal, oil, and natural gas. As a country with an energy structure dominated by high-carbon fossil, China announced that the time from completing carbon peaking to carbon neutrality is much shorter than that of developed countries. As a critical energy product, the crude oil price affects the Certified Emission Reduction prices under the EU carbon market in the following ways: first of all, crude oil price affects the natural gas price, and the electricity price. The article further analyzes the impact of carbon emission right futures trading model on reducing the use of fossil energy. Studying the price correlation between the two prices will provide references for the Chinese carbon market, and help the world achieve carbon neutrality
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