Research On Carbon Finance Assets Pricing In The European Union Emission Trading Scheme

Since the United Nations Framework Convention on Climate Change and Kyoto Protocol had been signed, more and more attention is paid to climate change. So, what's the relationship between climate change and greenhouse gas emissions? Whether emerging carbon finance can slow down greenhouse gas emissions and global warming? What's the carbon finance? Who take part in carbon finance? What are carbon finance assets? How to determine carbon finance assets' price? Research on these issues is not only consistent with the background of low-carbon economy, but also the key to achieve scientific development and build up a harmonious society, especially the issue of carbon finance assets pricing. How to determine carbon finance assets' equilibrium price becomes the theory researchers and practitioners' main issue, and one of the basic issues in carbon finance research. Therefore, this study tries to solve the issue of determining carbon finance assets' equilibrium price. This paper is conducted to find out general rules in carbon finance market by studying carbon finance assets' equilibrium price, and provide the reference price for Chinese enterprises that participate in global carbon finance market, and help Chinese enterprises take the initiative in carbon finance market negotiation maximally.Around this core issue, the logical structures of this study are arranged as follows:The first part is an introduction, which list core issue, defines the basic concepts, and illustrates logical structures and possible contributions.The second part is literature review, which reviews the achievement of the former researches from the respects of carbon emissions right allocation, carbon emissions trading, and carbon emissions pricing. The third part is state of the carbon market, which analyzes global state of carbon market in terms of global state of mandatory carbon market, global state of voluntary carbon market, and global clean development mechanism (CDM), and analyzes Chinese state of carbon market in terms of Chinese CDM projects by region, Chinese CDM projects by scope, and construction situation of Chinese carbon finance exchanges.The fourth part is models and applications of carbon finance assets pricing. The generalized autoregressive conditional heteroscedasticity (GARCH) model is established to determining carbon finance spot assets' prices, and forecasting the trends of carbon finance spot assets' prices. The dynamic simultaneous equation models (DSEM) are used to determining carbon finance future assets' prices, and forecasting the trends of carbon finance future assets' prices. The Black-Scholes call option pricing model and Black-Scholes put option pricing model are established to determining carbon finance option assets' prices, and forecasting the trends of carbon finance option assets' prices.The fifth part is conclusion, which summarizes the main ideas of this paper, points out the limitations and disadvantages, and future study directions.The analysis of global state of carbon market shows that: Firstly, allowance-based transaction is primary, and project-based transaction is supplementary; Secondly, spot transaction is primary, and future transaction is supplementary, and option transaction is also took account. Thirdly, voluntary carbon finance trading begins to shift from over-the-counter (OTC) to exchanges; while bilateral trading shifts toward the OTC via exchanges. Fourthly, China becomes the biggest host parties in CDM which generated the most certified emission reductions (CERs), and European development countries become the main investor parties in CDM, and CDM is mainly used to cut down greenhouse gas emissions form energy industry.The analysis of European Unit allowances (EUAs) spot price fluctuation in European Energy Exchange (EEX) shows that: Firstly, A leptokurtic distribution with negatively skewed in EUAs spot price fluctuation which clearly reject the null hypothesis of normal distribution. Secondly, EUAs spot price fluctuation has long-term memory. Thirdly, EUAs spot price fluctuation is non-stationary; while the logarithmic returns of EUAs spot price fluctuation is stationary. Fourthly, EUAs spot price fluctuation has conditional heteroscedasticity. Fifthly, EUAs spot price fluctuation has autocorrelation. The analysis of EUAs and CERs daily future price fluctuation in European Climate Exchange (ECX) shows that: Firstly, A leptokurtic distribution with negatively skewed in both EUAs and CERs future price fluctuation, and EUAs daily future price fluctuation reject the null hypothesis of normal distribution, while CERs daily future price fluctuation accept the null hypothesis of normal distribution. Secondly, EUAs and CERs daily future price fluctuation are non-stationary, while the logarithmic returns of EUAs and CERs daily future price fluctuation is stationary. Thirdly, EUAs daily future price is affected by CERs daily future price, second-order EUAs spot price in EEX, and EUAs spot price in BlueNext. Fourthly, CERs daily future price is affected by CERs sport price in BlueNext, and Second-order EUAs spot price in EEX. Fifthly, EUAs and CERs daily future price fluctuation have first-order autocorrelation.The study of models and applications of carbon finance assets pricing shows that: Firstly, GARCH model applies to carbon finance spot assets pricing. Secondly, DSEM apply to carbon finance future assets pricing. Thirdly, Black-Scholes call option pricing model and Black-Scholes put option pricing model apply to carbon finance option assets pricing. Fourthly, all pricing models which discussed above are able to forecasting the trends of carbon finance assets' prices extreme precise.The possible contributions of this paper are: Firstly, GARCH model is adoped to carbon finance spot assets pricing which find that the carbon finance spot price series has conditional heteroscedasticity. Secondly, DSEM are adoped to carbon finance future assets pricing which find the prcie relationship between carbon finance spot markets and carbon finance future markets. Thirdly, Black-Scholes call option pricing model and Black-Scholes put option pricing model are adoped to carbon finance option assets pricing.