Carbon Emission Trading Market Research Articles

Is carbon emission trading a green blessing or a curse for firm performance in China? A quasi-experiment design and exploring the spatial spillover effect.

This paper conducts quasi-experiment design with Chinese listed companies microdata to investigate the effect and mechanism of corporate participation in carbon emission trading market on firm financial performance by using the staggered difference-in-differences method. We show that: a) corporate participation in carbon emission trading market can enhance firm financial performance; b) an increase in green innovation ability and a decrease in strategic choice variance both partially mediate the relationship between carbon emission trading and firm performance; c) executive background heterogeneity and external environmental uncertainty moderate the relationship between carbon emission trading and firm performance in different directions; d) our further study indicates that carbon emission trading pilot policy has a spatial spillover effect on firm financial performance in the neighboring provinces. Therefore, we recommend that the government and enterprises make an effort to further stimulate the vitality of corporate participation in carbon emission trading market.

The Interconnection Ideas for Carbon Emissions Trading Market in Guangdong, Hong Kong, Macao and Greater Bay Area

Building the interconnection mechanism of carbon emission trading market in the Guangdong-Hong Kong-Macao Greater Bay Area is an innovative exploration to promote regional carbon emission reduction. This paper analyzes the feasibility of interconnecting carbon emission trading markets in the Bay Area from the perspectives of the difference between industrial structure and energy consumption, as well as the compatibility of carbon emission trading systems, by analyzing the operation status of carbon trading markets in Guangdong, Shenzhen, Hong Kong, and Macao, and the experience of Guangdong and Shenzhen as the Chinese carbon trading pilot. Based on the above discussion, this paper puts forward three adjustment ideas for the interconnection of the Bay Area Carbon Market: providing legal support, unifying the access to industry sectors and its quantities, and establishing a complete carbon emission monitoring, reporting and verification institution.

Research on the Construction Path of China's Zero-carbon Ports from the Perspective of Marine Carbon Sink Trading

At present, the international market has gradually carried out research on forecasting the trading price of carbon emissions with macroeconomics and energy market as the main influencing factors, supplemented by other factors such as policy factors. In order to speed up the construction of carbon accounting system, enrich the content of China's carbon pricing mechanism and improve the carbon emission trading market, this study constructs an index system from four aspects: macro-economy, energy price, climate environment and international market, and objectively screens out the important influencing factors of carbon trading price through Lasso regression, and uses BP neural network prediction model to predict carbon trading price. [7] We should focus on reducing the proportion of coal consumption by port enterprises and increasing other clean energy consumption. This result can provide basis and reference for the construction of zero-carbon ports and the construction of ocean-port carbon trading information platform in China.

Assessing the policy synergy among power, carbon emissions trading and tradable green certificate market mechanisms on strategic GENCOs in China

The establishment of carbon emissions trading (CET) and tradable green certificate (TGC) markets in China will cause great alterations in the bidding behavior for generation companies (GENCOs) and affect the low-carbon transformation of power industry. In this paper, a Nash bargaining game model is constructed to assess the synergy of power, CET and TGC markets on decision behavior of non-renewable energy GENCOs, renewable energy GENCOs and power purchasers. The simulation results show that there is transition incentive effect, price interaction effect and profit blocking effect between three markets. With the introduction of emissions trading scheme and renewable portfolio standard (RPS), the scheduled power of renewable energy GENCOs will increase by 21.43%, and transaction prices will reduce to 449.58 CNY/MWh; while the scheduled power of non-renewable energy GENCOs will reduce by 4.66%, and transaction prices will increase to 443.71 CNY/MWh, which make all power generation types compete at equivalent price level. Under the current installed capacity distribution and load demand, it is the critical point when RPS is 18.7% and the benchmark value of free carbon quota for units above and below 300 MW are 0.857 tCO2/MWh and 0.959 tCO2/MWh. Once exceeded, it will affect social benefits and emission reduction efficiency.

The spillover effects in the “Energy – Carbon – Stock” system – Evidence from China

This paper integrates China's energy market, carbon emission trading market, and stock market of energy-intensive sectors into one framework based on a system perspective. We quantify the return and volatility spillover effects respectively, and deeply examine the structures and driving factors of these two spillovers. Our findings demonstrate that (i) the spillover linkage in the “Energy – Carbon – Stock” system is considerable, particularly the return spillover connectedness; (ii) the stock market occupies a dominant position in the system and primarily serves as a net transmitter in the spillover structure; (iii) policy adjustment and energy market turbulence are the main driving events for the sharp rise of the overall spillover; (iv) there exists an obvious cluster effect in the spillover network structure, and the occurrence of major events will make the most affected assets move to the network center and become the main spillover sources; (v) the state of the energy market, the stock market stability and the monetary policy orientation all have a strong explanatory power for the overall spillover. Our research provides useful implications for policy makers, energy-intensive industries and green investors.

Green Bond Pricing and Optimization Based on Carbon Emission Trading and Subsidies: From the Perspective of Externalities

In this paper, we establish a model based on real options theory and fractional Brownian motion (FBM) with jumps to price green bonds, and thus alleviate the externalities of green bonds. We assume that the floating value of green bonds is linked to the carbon price. The carbon emission trading mechanism and government subsidy policy are introduced into this model, and the expression is derived from the stochastic differential utility framework based on the fast Fourier transform method. Based on the numerical analysis and the simulations, this paper analyzes when governments are facing financial and carbon emission constraints and how policymakers balance the allocation between carbon allowances and government subsidies to help green bonds reach the exogenous equilibrium price. Our results have implications in terms of optimizing the distribution of economic resources by the reasonable pricing of green bonds. It is in line with the current theme of global energy conservation and emission reduction, and also has certain guiding significance for the development of the carbon emission trading market.

The synergistic effect between Renewable Portfolio Standards and carbon emission trading system: A perspective of China

Renewable Portfolio Standards (RPS) and carbon emission trading (CET) system are the top-level system design of China's energy low-carbon transformation, which have great strategic significance for realizing the “carbon peak in 2030 and carbon neutrality in 2060”. At present, China's tradable green certificates market and CET market are still in the initial stage. The implementation single system may have diverse trials and errors in its initial stage, and the market activity and transaction frequency are low. Therefore, this paper aims to explore whether the synergistic effect between the two systems can effectively promote China's energy low-carbon transformation. This paper establishes the system dynamic model of the synergistic effect between the RPS and CET in China's electricity market to reveal the influence mechanism and the synergistic effect. The results show that: (1) There is a positive synergistic effect between the RPS and CET, which will change with the institutional parameters. (2) The simultaneous implementation of the RPS and CET can effectively stimulate market vitality and promote the development of the renewable energy industry. (3) Higher quota and lower benchmark price can optimize power source structure, and improve social welfare and institutional performance.

Electricity-Carbon Joint Trading of Virtual Power Plant with Carbon Capture System

With the establishment and rapid development of the national carbon emission trading market, new energy system participates in the carbon emission trading market. Analysing the potentiality of virtual power plant trading in carbon emission trading market, this paper designs a two-stage joint trading mechanism for electricity and carbon market with a weekly cycle according to their characteristics, which contain multiple transaction types for both markets. In addition, this paper introduces a carbon capture system (CCS) in gas turbine, which reduces the actual carbon emissions and increases the carbon market income of virtual power plant. Furthermore, it improves the comprehensive and flexible operation capability by adjusting the operation level of CCS, which is conducive to the timely consumption of renewable energy. Aiming at the uncertainty of renewable energy output and electricity price, the paper adopts a multiscenario analysis method to deal with it and establishes a stochastic optimization model to maximize joint earnings. Finally, through example analysis with GAMS, the effectiveness of the scheduling model is verified with simulation results. The overall income of the virtual power plant is improved, and the low carbon power is realized.

Do Carbon Emission Trading Schemes Promote the Green Transition of Enterprises? Evidence from China

As one of the environmental governance tools used to achieve green and low-carbon development in China, the ability of carbon emission trading schemes (CETS) to promote the green transition of enterprises is key to assessing the effectiveness of their implementation. Therefore, this paper used the panel data of China A-share listed heavy-polluting enterprises from 2010 to 2019, adopted the super-SBM model and GML index to measure the green total factor productivity (GTFP) of enterprises as an indicator of green transition, and further employed a staggered difference-in-difference model (DID) based on propensity score matching (PSM) to investigate the impact and mechanism of CETS on the green transition of enterprises. The results revealed that CETS significantly improved the green development efficiency of heavy-polluting enterprises and promoted green transition. In addition, the promotion was more pronounced among enterprises with weak cost transfer abilities, low levels of financing constraints, and high-quality internal control systems as well as in areas with high environmental enforcement intensity. More importantly, the mechanism analysis showed that heavy-polluting enterprises mainly chose to increase green technological innovation, especially substantive green technological innovation, and accelerated productive capital renewal to achieve their green transition targets. This study provides empirical evidence for improving the construction of the national carbon emission trading market and promoting the green transition and low-carbon development of heavy-polluting enterprises.

A collaborative generation-side clearing model for generation company in coupled energy, ancillary service and carbon emission trading market in China

Under the current technical conditions and power mix in China, flexible modified thermal power units must provide enough flexibility resources for new power system since the potential of flexible resource has not been fully used. In this paper, a bi-level model is proposed to characterize the decision behavior of the generation company in the case of individual rationality and generation-side coordination. The model fully considers the concrete conditions of China and the technical differences between thermal power units in the multi-market (including energy, ancillary services and carbon emission trading market). The bi-level model could be reconstructed into an equivalent MILP model which can be solved directly. The strategic bidding behavior of small capacity units in the energy market show the urgency to enhance the transmission of deep peak regulation price compensation signals. The coupling of multi market is likely to be the most effective policy package to guide large-scale units to play a supporting role and small-scale units to assume the regulating function to play a role in the transition to a low-carbon future. Long-term policy mechanisms should be developed, combining electricity transition with the mechanisms in the carbon emission trading market to achieve the integral maximization of environmental benefit.

Research on CCUS business model and policy incentives for coal-fired power plants in China

Carbon capture, utilization and storage (CCUS) is currently the most potential cutting-edge emission reduction technology in China to achieve the vision of carbon neutrality. The industrialization of CCUS faces multiple challenges such as high cost, technical security and public acceptance, but the lack of mature business model and corresponding incentive policies is the main restrictive factor affecting the industrialization of CCUS technology. Therefore, exploring a feasible CCUS business model and formulating relevant incentive policies are of great significance for promoting the commercial deployment of CCUS and achieving the national carbon neutrality goal. Focusing on coal-fired power plants, this paper uses the system dynamics method to compare and analyze two different CCUS business models from the perspectives of economy, technical feasibility and emission reduction benefits, and evaluate the system operation effects under different incentive policy scenarios. The research results show that the vertical integration model is the most potential CCUS business model in China at present, and different incentive policies will cause different changes in the CCUS system. Based on the research conclusions, this paper puts forward suggestions such as formulating differentiated power generation quota subsidy policies and actively developing the carbon emission trading market.

Fragmented or Unified? The State of China’s Carbon Emission Trading Market

China has adopted a gradualism principle in establishing its carbon emission trading system from the regional pilot markets to a national one. In view of the huge market potential and large differences across China, this paper applies the cointegration test and VECM (Vector Error Correction Model) to investigate the long-run trends and the price dynamics of regional pilot markets. The results show that the prices of the regional pilot markets form three long-run trends exhibit mean-reversion patterns. The launch of the national market marks the different performance of regional pilot markets. After the launch of the national market, the number of long-run trends reduces from three to one and the severity of the mean-reversion patterns is eased, indicating the efficiency improvement in China’s carbon market from a fragmented toward a unified market. The policy implication is that China should further develop its national market by incorporating the regional markets into the national one and encouraging more market participants for market transaction.

Does carbon emission trading mitigate firm's default risk? Evidence from China

Reducing greenhouse emissions and mitigating the existential threat of climate change for the environment and ecological well-being have become a global consensus. On one hand, facing certain pressure of carbon emission reduction, the default risk of firms may increase due to higher costs of environmental regulations. On the other hand, firms' default risk may decrease as firms' sustainable development could tradeoff the transition costs of firms. Under such uncertain conclusions, we investigate the impact of carbon emissions trading (CET) system in China on firms' default risk. Using panel data of Chinese listed firms during 2010–2019, the difference-in-differences method (DID) is adopted to study the influence of CET on firm's default risk. The results show that the CET significantly reduces the default risk of firms. Further analysis shows that this improvement of firms' financial stability is affected by industrial heterogeneity, external financing constraint heterogeneity and firms' own characteristics such as innovation capacity. Overall, our findings not only expand the economic consequences of environmental regulations, but also provide implications on how to improve the Chinses CET pilot policy and construct a national CET market.

China's forest carbon sinks and mitigation potential from carbon sequestration trading perspective

To achieve carbon peaking and neutrality goals, China is establishing a national unified carbon emission trading market, especially including forest carbon sequestration market. This study assesses the potential of China’s forest carbon sinks and mitigation potential. We use the Global Forest Products Model to simulate the dynamic changes in China's forest resources from 2018 to 2060, under different carbon sequestration prices scenarios. The projection results indicate that China's forest carbon sinks will be 1.26 Pg (peta-grams) in 2021–2030 and 6.78 Pg in 2021–2060, giving an offset ratio of 4.9–7.0 % and 13.2–18.2 % of China's projected carbon emission in the same period, respectively. Therefore, China's forest carbon sinks will play an important role in carbon peaking and neutrality goals. Meanwhile, forest carbon trading has the potential to increase China's forest carbon sequestration, although the impact may not be immediately apparent. The additional increase in forest carbon sinks from carbon sequestration trading scenarios will not exceed 1.6 % of China’s total carbon emissions between 2021 and 2030. At the current carbon trading price in China ($6.84/t), the increase in forest carbon sinks resulting from forest carbon trading will give an offset ratio of approximately 1 % of total carbon emissions from 2021 to 2060. When the carbon price rises, this offset ratio is 2.3 % to 3.1 % ($25/t), 4.1 % to 5.6 % ($54/t). China should therefore hasten the integration of forest carbon sinks into the national carbon emission unified market and boost the carbon trading price by policy design and market adjustment, or government directly compensate for the forest carbon sequestration function. For forest carbon sinks to play their role in reducing the carbon neutral cost of society, China should raise the amount of forest carbon sink CCERs (Chinese Certified Emission Reductions) used to offset carbon emission allowances in key emission units.

The interactions between renewable portfolio standards and carbon emission trading in China: An evolutionary game theory perspective

Renewable Portfolio Standards (RPS) and Carbon Emission Trading (CET) are the policy instrument for China to achieve the low-carbon energy transition. Changes in policy combinations will affect the equilibrium state of the interactive system and bring uncertain risks to the expected effects of policy implementation. Given the assumption that the power users undertake RPS assessment and the CET market is extended to industries in addition to the power generation industry, this paper first constructs a game model in the context of RPS and CET where groups of power users and thermal power manufacturers jointly participate. Then, with China's provincial market data, it analyzed the evolution process of group strategy under different policy parameters and described the characteristics of the transition between the stable and unstable states of the system. Finally, a dynamic and differentiated mechanism design for policy parameters is proposed to restrain system oscillations. The simulation results reveal the interaction between market players' strategies, and a quantitative framework for analyzing system stability under different policy parameter combinations is proposed, which can provide an analysis framework for China to implement RPS and CET and deliver a relevant analysis basis for setting policy parameters.

Have carbon emission trading pilot policy improved urban innovation capacity? Evidence from a quasi-natural experiment in China.

The carbon emission trading pilot policy is an important initiative to achieve synergistic economic-environmental development. Based on the data of 268 cities in China from 2006 to 2020, this paper analyzes the impact of carbon emission trading pilot policy on urban innovation capacity by using a time-varying difference-in-difference model. The study shows that, first, the implementation of the CETP improves the innovation capacity of cities, and the robustness test confirms the above findings. Second, the effect of the policy on enhancing urban innovation capacity is heterogeneous between the type of innovation and city type: the promotion of innovation capacity is stronger for utility model patents and non-capital cities. Third, there is a positive spillover effect of the implementation of the CETP on the promotion effect of the urban innovation capacity, which can lead to the improvement of the innovation capacity of neighboring cities. This paper has some reference value for building a unified carbon emission trading market and promoting low-carbon economic development within China.

Price Dynamics and Interactions between the Chinese and European Carbon Emission Trading Markets

The European carbon emission trading market is the largest and most mature market, while China’s carbon market has a short history. Institutionally, cross-market transaction is infeasible between the two markets. This paper investigates the long-run trend between the two markets as well as the price dynamics. Results show that a long-run trend exists between the Chinese and European carbon markets. Both markets possess self-correction capability in reducing price deviations, signaling a certain level of market efficiency. However, both markets also exhibit pricing inefficiency as historical price movements are able to impact prices. The European market informationally leads the Chinese market. Policy implications are that China should further upgrade its information disclosure system, such as unifying information disclosure standards across industries, and further develop its carbon derivatives markets to improve market transparency and market competition.

Can carbon emission trading pilot policy drive industrial structure low-carbon restructuring: new evidence from China.

Industrial structure low-carbon restructuring is an essential channel to accelerate China's economic growth and fulfilling carbon emission reduction goals. Whether carbon emission trading pilot policy, as an influential carbon reduction instrument, fosters industrial structure low-carbon restructuring is of major significance to green economic development. This paper empirically investigates the shock of the carbon emission trading pilot policy on industrial structure low-carbon restructuring using the differences-in-differences (DID) and synthetic control method (SCM). Statistics reveal that sectors with low carbon productivity, such as electricity, steam, and hot water production and supply, ferrous metal smelting and pressing, etc., and sectors with high carbon productivity, such as electrical equipment and machinery, electronics and telecommunication equipment, etc. The industrial structure did not develop a stable trend of change before the 12th Five-Year Plan, but a stable trend of low-carbon restructuring emerged after such a period. Carbon emission trading pilot policy significantly facilitates industrial structural low-carbon restructuring. Carbon emission trading pilot policy inhibits energy-intensive industries in the industrial sector significantly, which promotes industrial structure low-carbon restructuring. Therefore, policymakers need to develop a nationwide carbon emission trading market that includes more industries to guide production factors to industrial sectors with high carbon productivity for industrial restructuring and dual carbon goals.

Do green bonds and economic policy uncertainty matter for carbon price? New insights from a TVP-VAR framework

Green bond shocks and economic policy uncertainty are essential factors affecting macroeconomic development and green finance. In this paper, the time-varying parameter vector autoregressive (TVP-VAR) framework is used to analyze the monthly data of China from April 2014 to March 2022 and to investigate the dynamic impact of green bond shock and economic policy uncertainty on carbon prices. The results show that economic policy uncertainty and the impact of the green bond have significant time-varying and short-term effects on carbon price. In the short term, economic policy uncertainty has a significant positive impact on carbon price most of the time, while green bond has a significant negative impact on carbon price most of the time. Meanwhile, economic policy uncertainty and the impact of green bond on carbon price in Hubei and Guangdong are heterogeneous. In addition, we also use Bayesian VAR (BVAR) model to test the robustness of the results. Based on the research results, some policy suggestions are put forward, including improving the stability of economic policies, implementing green bond support policies, and speeding up the improvement of the national unified carbon emission trading market.

Heterogeneity and spillover effects of carbon emission trading on green innovation.

The massive emission of greenhouse gases poses a serious threat to the ecological environment. In this context, the relevant effects of the carbon emission trading (CET) market, which promotes greenhouse gas emission reduction by market means, have been widely investigated. Taking the China's CET pilot as a research target, the heterogeneity and spillover effects of CET on green innovation are explored by using the sample data of 279 prefecture-level cities in China from 2008 to 2019. The results are as follows. First, on the whole, CET significantly promotes strategic green innovation, but it has no significant effect on substantive green innovation. Second, the green innovation effect of CET varies with the level of green innovation, and the heterogeneous effects of green innovation are also reflected in different degrees of marketization, fiscal decentralization and government environmental concern. Third, CET has a positive spillover effect on green innovation, and the spillover effect is more significant than the direct effect, accounting for 74.8% of the total effect. Finally, some corresponding policy suggestions are put forward according to the above research conclusions.