Recently, Zhao Haozen, a junior undergraduate student in Finance of our school, published a high-level research paper “What drive carbon price dynamics in China?” in International Review of Financial Analysis (IRFA), a mainstream journal in finance, indexed by SSCI, JCR Q1, 3* journal in ABS rankings, and ranked 8/110 in ESI economics and business journals, with an impact factor of 5.373 in 2020.
This paper examines the driving factors of China carbon price in a systemic way with quantitative analysis. Specifically, three categories of driving forces as macro economy risk and uncertainty, energy and environment factors are selected to investigate their impacts on carbon price in China, by adopting the dynamic connectedness measurement approach. The empirical results confirm each driving factor has made contributions to the carbon price fluctuations, and the dynamic interactions among them have enhanced connectedness of the whole system. However, the directional dynamic spillovers indicate main driving factors to carbon price are heterogeneous varying over the whole sample and in different carbon markets. Most importantly, market sentiment plays main role in the carbon price dynamics of Guangdong market, whereas the electric power index makes great effects to Hubei carbon price changes, and the carbon price fluctuations in Shenzhen market are largely caused by air quality situation. As China is currently promoting the construction of carbon market, understanding the dynamics of price drivers and the heterogeneous influence of major factors in China's carbon market is meaningful for policy making and investor decisions related to China's carbon market.
