A Research On The Correlation Between Carbon Market,Energy Market And Industrial Industry

With the rapid development of the global economy,the issue of climate change has posed an increasingly serious threat to the ecological environment around the world.Since the EU ETS was first established,countries around the world have established carbon markets covering multiple regions and industries to achieve their respective emission reduction targets.As the world’s largest carbon emitter,China has made commitments to "carbon neutrality" and "carbon peaking" in recent years,and has seen the construction of carbon trading markets as an important path to achieve its emission reduction targets.The volatility of carbon prices has put pressure on the upstream industries in the whole industry chain,thus affecting the primary energy production industries and the downstream industrial sectors.The study of the correlation and information spillover between the carbon market and its associated markets and industries has important theoretical and practical significance for the construction of China’s carbon market and for investors involved in the carbon market.Based on such a background,this paper takes the EU and Chinese carbon markets,energy markets,and industrial sectors that integrate high-carbon companies’ market conditions as research objects.Three questions are mainly studied and hoped to answer:(1)What is the correlation among the carbon market,the industrial market and the industrial sector? How does the correlation change over time?(2)Are there information spillover effects among the carbon market,the energy market,and the industrial sector? What is the role of the carbon market?(3)What are the differences between China and the EU in the relationship between the carbon market and other markets? What enlightenments will these differences bring to Chinese future carbon market construction?For the above questions,this paper first uses the time-varying Copula model to compare the returns of EU and my country’s carbon trading prices,energy futures prices,and industrial industry indexes from the perspectives of dynamic correlation and tail correlation.The results show that the EU carbon market and the traditional energy market’s return rate are more likely to plummet at the same time,while the rate of return of the industrial sector will rise sharply at the same time Chinese carbon market is more affected by international crude oil futures,and it is more likely to plummet at the same time.Next,this paper uses the spillover index method to conduct an empirical analysis of the return transmission direction and the volatility transmission direction among the carbon market,the energy futures market and the industrial industry index through the static and dynamic spillover indexes,and makes comparisons.The results show that the EU’s “carbon-energy-industry”system is more interconnected than that in China in terms of return rate spillovers and volatility spillovers;however,whether it is in China or the EU,the volatility connectivity of the entire system is stronger than return connectivity.In terms of rate of return spillover,Chinese carbon market has acted as the net receiver of the entire system most of the time,while the EU’s carbon market has acted as a net transmitter.This explains that the degree of development of the EU’s carbon market is relatively mature to a certain extent.It can have a certain impact on the rate of return of the energy futures market.In terms of volatility spillover,due to the stronger connectivity of the EU’s “carbon-energy-industry” system,the links between the various markets in the system are closer,which also makes the system more susceptible to international energy markets and policies.The characteristics of the impact of the situation are manifested by frequent and large changes in the volatility spillover index.Based on the above conclusions,this paper puts forward the following policy recommendations from the perspectives of carbon market development,investors and regulators: First,while building a comprehensive carbon market,the link between the carbon market and other markets should be opened,so that carbon trading prices can better reflect the changes in energy demand and industrial sector development,and thus better serve the goal of energy conservation and emission reduction in China.Secondly,for China’s carbon futures investors,they should pay some attention to the dynamics of the fossil energy market and industrial market,so as to adjust their investment strategies in a timely manner.Finally,in the process of China’s low-carbon economic transformation,it should focus on improving the legal system and supporting management system of the carbon market to avoid the risks brought by changes in policy situation and macroeconomic uncertainty.At the same time,an effective risk monitoring and early warning mechanism should be established to prevent the occurrence of systemic risks.