4.7 Article

Time-frequency dynamics, co-movement and causality among returns of global carbon emissions trading schemes (ETSs): A tale of four markets

Journal

JOURNAL OF CLEANER PRODUCTION
Volume 363, Issue -, Pages -

Publisher

ELSEVIER SCI LTD
DOI: 10.1016/j.jclepro.2022.132564

Keywords

Carbon emissions trading scheme (ETS); Carbon trading price; Wavelet analysis; Co-movement effect

Funding

  1. National Natural Science Foundation of China [72174020, 71904009]
  2. Beijing Social Science Foun-dation [20GLC054]
  3. MOE (Ministry of Education in China) Project of Humanities and Social Sciences [18YJC840041]

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This study explores the co-movement effect of returns among the four most representative global carbon emissions trading schemes (ETSs) and analyzes the correlations and time lag characteristics of returns in these ETSs. The findings suggest that there are certain volatility characteristics in the trading prices of these ETSs, and the linkage between ETS trading rates varies across frequencies and evolves dynamically. The study also emphasizes the importance of establishing ETS and improving risk prevention awareness among market participants.
This study aims to explore the co-movement effect of returns among the four most representative global carbon emissions trading schemes (ETSs) and the correlations and time lag characteristics of returns in four ETSs. Specifically, this study examines the price volatility and return coherence of ETS of the European Union (EU), New Zealand, South Korea, and Shenzhen, China from 2013 to 2019 using the wavelet analysis method. Firstly, from the temporal perspective, the trading prices of the four ETSs demonstrate certain volatility characteristics, that is, more medium-and long-term (over five trading days) but less short-term fluctuations. Secondly, because of the different starting stages and maturity levels of the four major ETSs, the wavelet analysis indicates that the linkage between ETS trading rates varies across frequencies and evolves and shows dynamic characteristics from two angles of time and frequency domains. The findings also show the principle of mutual influence or linkage between global ETSs, which is helpful for the establishment of ETS and can improve the awareness of ETS risk prevention among market participants to avoid losses.

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