Abstract
This paper studies the heterogeneous effects of exchange rate and stock market on carbon emission allowance price in four emissions trading scheme pilots in China. We employ a panel quantile regression model, which can describe both individual and distributional heterogeneity. The empirical results illustrate that the effects of explanatory variables on carbon emission allowance price is heterogeneous along the whole quantiles. Specifically, exchange rate has a negative effect on carbon emission allowance price at lower quantiles, while becomes a positive effect at higher quantiles. In addition, a negative effect exists between domestic stock market and carbon emission allowance price, and the intensity decreasing along with the increase of quantile. By contrast, an increasing positive effect is discovered between European stock market and domestic carbon emission allowance prices. Finally, heterogeneous effects on carbon emission allowance price can also be proved in European Union Emission Trading Scheme (EU-ETS).
Highlights
With the development of economies, the carbon dioxide emission has increased rapidly in decades [1], which caused many people have intensified concern about the natural environment
This paper aims to study the effect of exchange rate and stock market on the carbon emission allowance market in four major provinces in China
The objective of this research is to study the heterogeneous effects of exchange rate and stock market on carbon emission allowance trading market from the perspective of panel quantile regression
Summary
With the development of economies, the carbon dioxide emission has increased rapidly in decades [1], which caused many people have intensified concern about the natural environment. One hundred eighty-three countries adopted the Kyoto Protocol in 2009, designed to promote development of carbon trading markets This agreement is designed to contribute to the improvement of such markets while helping, as a result, to protect the environment through controlling the emission of greenhouse gases. Previous studies that mainly used linear methods to discuss the carbon trading price have been challenged strongly by the rationality of applying nonlinear approach [2,3]. Another strand of the literature has been dedicated to exploring the drivers of CO2 emission allowance markets
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