Emission Trading System, Carbon Market Efficiency, and Corporate Innovations

With the global acknowledgment of the Kyoto Protocol came the carbon derivatives such as carbon futures, options, and swap contracts. The innovative carbon derivatives are complex in design and contain risks that are difficult to predict and avoid. The global Carbon Market should have higher requirements in the supervision laws and regulations. To this end, the financial system theories and the financial characteristics of carbon derivatives are expounded. The three-dimensional structural modeling technique of systems engineering is introduced to construct the Carbon Market framework. The proposed framework factors for the organization, product, and policy dimensions of the Carbon Market are also described. Additionally, this model explains the market organization, the instruments and media connecting market supply and demand, and government regulation measures. In particular, the supervision and management aspects of the policy dimension are introduced in detail. The Carbon Market and relevant law systems in the United States, the European Union, and India are mainly studied and compared. Based on the comparison results, the necessity of market supervision is explained. Finally, the Big Vector Autoregression model is used to study the relationship between the Carbon Market, energy market, and financial market. After the introduction of the National Carbon Market, the correlation between the energy market and the financial market has become relatively complex but also presents a certain degree of asymmetry. According to the above results, the paper proposes to use the “regulatory sandbox” mechanism to improve the regulation of the subject and object of the carbon financial and legal relationship and try to carry out regulatory innovation for the risks of the entire carbon market.

Section: The Situation Of Policy Dimension In the International Carbo...mentioning

confidence: 99%

Carbon Derivatives-Directed International Supervision Laws and Regulations and Carbon Market Mechanism

Cheng

2022

“…In China's case, studies agree with the ineffective application of the carbon financial mechanism, which is believed to be one of the important reasons behind the lower carbon price in its pilot markets [35]. Zhu et al found that when the gap between the carbon price and the marginal abatement cost (MAC) of CO 2 is smaller, the carbon financial derivatives are more abundant [25]. Liu C et al took regression tests and found an empirically significant relationship between the average price of carbon emission rights and the total amount of regional carbon emissions in a six pilot Chinese markets but failed to find significant and negligible relationships between the issuance amount of green bonds and the transaction amount of carbon emission rights [36].…”

Section: Carbon Financial Mechanismmentioning

confidence: 94%

“…It suggests that free allowances are preferred for an ETS in the early stages. In order to have effective prices, dynamic allocation (e.g., outputbased free allowances and mixed allowance) is extensively discussed on the cost-contained, price-responsive allowance supply [25,26] and on the capacity of explicit carbon pricing to drive significant abatements [27].…”

Section: Carbon Total Emission Trading Mechanismmentioning

confidence: 99%

The Influencing Factors of the Carbon Trading Price: A Case of China against a “Double Carbon” Background

Zeng

Dan-ni

et al. 2023

The Carbon trading price (CTP) can best reflect the fluctuations of the carbon trading market. This paper comprehensively analyzes the CTP mechanism of China’s carbon trading market, discusses the main factors affecting China’s CTP, which include macroeconomic factors, energy price factors, policy factors, and environmental factors, and provides three hypotheses. In order to highlight and test the three hypotheses about the CTP, five representative carbon trading pilot markets were included: Beijing, Shenzhen, Shanghai, Hubei, and Guangdong, and the daily average price data (over years) were adapted from January 2017 to December 2021, using a dynamic heterogeneous panel PMG model. The current paper selects the China air quality index (AQI), Bohai-Rim steam-coal price index (BSPI), Liquefied natural gas index (LNGI), and the Shanghai stock exchange industrial index (SSEII) as the explanatory variables. The empirical results show that there is a long-term equilibrium relationship between the CTP, AQI, energy price, and macroeconomics. Strengthening environmental governance, optimizing the energy structure, and expanding the carbon trading market coverage should be adopted to improve the China carbon emission trade exchange (CCETE) and stabilize the CTP.

“…Porter & Linde (1995) [7] proposed the "Porter Hypothesis", which argues that enterprises' environmental protection investment can prompt companies to increase innovation in and the use of clean technologies, offsetting environmental protection costs and achieving a win-win situation for both environmental governance and economic profitability. Research on corporate environmental governance behaviors such as corporate environmental disclosure [8], environmental performance [9,10], and technological innovation [11][12][13] has received increasing attention from scholars.…”

Section: Literature Reviewmentioning

confidence: 99%

Environmental Regulation, Political Connections, and Corporate Green Investment

Zhu

Liu²,

Long

et al. 2022

Self Cite

Based on the implementation of China’s new Environmental Protection Law (the new EPL), using the difference-in-differences (DID) method and the PSM method, this paper examines the impact of changes in local environmental governance motivation on corporate environmental protection investments before and after the implementation of the new EPL. The results show that, before introducing the new EPL, the scale of green investment of politically connected enterprises was significantly lower than that of other enterprises; after the introduction of the new EPL, the increase in environmental protection investment by politically connected enterprises was significantly higher than that of other enterprises. This promotion effect is more potent for formally politically connected enterprises. Given this, we suggest that governments need to achieve fair law enforcement of environmental protection and avoid the distortion of ecological protection investment by political connections during economic transitions.