Risk contagion and decision-making evolution of carbon market enterprises: Comparisons with China, the United States, and the European Union

Abstract

Carbon trading markets have become an important economic means of promoting carbon emission reduction and low-carbon transformation. Taking the carbon markets of China, the United States, and the European Union as the research objects, this study first uses a historical simulation method and Monte Carlo simulation to accurately measure the risk of the carbon trading markets and then integrates multi-agent modeling with complex networks to conduct a simulation of risk contagion caused by information transmission in the market and the decision-making changes of market trading enterprises. The findings show: ① In terms of the size of market risk, the carbon market in Chicago is the riskiest, the Shenzhen carbon market is the carbon market with the highest risk in the Chinese carbon market, and the carbon market in Hubei has the lowest risk; ② Negative market information causes trading enterprises to influx and exit the carbon trading markets, aggravates the instability of the market, and leads to the invalidation of carbon market trading rules in serious cases; ③ Compared with the international carbon market, the behavior decisions of Chinese carbon market trading enterprises are mainly affected by other enterprises in the same industry, while they are slow to perform new information in the market and have low sensitivity; ④ Compared with the international carbon market, the convergence of trading decisions and the limited liquidity of Chinese carbon market trading enterprises except Hubei are more significant, causing the price fluctuations in the carbon market to deviate from the normal level. This study has important practical significance for the prevention and control of carbon market risks and investment in China.