Research On The Correlation Between Carbon Trading Market And Energy Market

In order to control excessive emissions of greenhouse gases and address global warming problem,the European Union has established the world's first carbon market--the EU carbon emission trading system.Its development is influenced by many markets,and energy as the most important fuel for producing greenhouse gases play an important role in the development of the EU carbon market.It is of great significance to study the relationship between EU carbon market and energy market,whether in promoting the stable development of carbon market or in terms of portfolio and risk management.Therefore,this paper studies the correlation between energy market and carbon market.Based on the theoretical analysis of carbon quota futures price(referred to as "carbon price")and energy price,a more flexible copula model is further adopted for empirical analysis.In this paper,the energy prices that can best represent the EU region including brent crude oil futures price,British natural gas futures price and Rotterdam coal price,are selected to study the correlation between them and the eu carbon price.Firstly,a descriptive statistical analysis was carried out for the sequence of return rates of four assets,and an appropriate model was selected to determine the marginal distribution of return rates of each asset.Secondly,the copula function of carbon price and the price of crude oil,natural gas and coal was established.Finally,the characteristic of correlation between markets is analyzed according to the optimal copula function.By analyzing the constant copula function,we can know about that the correlation fitting effect of different copula functions on the market varies greatly.T-copula can better reflect the correlation between the markets for the carbon market and the crude oil market,as well as the carbon market and the natural gas market.The correlation between the carbon market and the crude oil market,the carbon market and the natural gas market is symmetry,and there is a stronger tail correlation,that is the probability of extreme rise and fall in both markets is greater.The Frank copula function is more suitable to describe the correlation between carbon market and coal market.In addition,the three energy return rate sequences are positively correlated with the carbon quota return rate sequences.By analyzing the time-varying correlation between two markets,it can be known that the time-varying copula function is better than all static copula functions.The tail correlation coefficient fluctuates greatly in different time periods.When asset prices fall in both markets,the correlation increases.