Carbon pricing and the commodity risk premium

This paper examines carbon emission allowances and pricing mechanisms in the context of climate change, utilizing nonlinear evolution equation theory. Through empirical analysis of European Union EUA option data using the EGARCH model, the study identifies non-normal distribution characteristics in carbon market returns and explores how policy innovations influence price fluctuations. A key contribution is its application of soliton theory to analyze carbon price dynamics. By employing integrable systems like the (1 + 1)-dimensional Boussinesq equation, it aims to develop a mathematical model for carbon price stability. The research calculates the Lax pair for this system and uses Hirota’s bilinear method among other techniques to investigate whether carbon prices can exhibit soliton phenomena with consistent waveforms and amplitudes. This work provides insights into the carbon market’s dynamics and lays a theoretical foundation for better simulation, market behavior prediction, and optimization of climate policies.

Modeling persistence of carbon emission allowance prices

This paper discusses a carbon emission allowance allocation problem from a regional authority’s perspective under a fuzzy environment, which is a multi-objective optimization process. Uncertain parameters are depicted as fuzzy variables and fuzzy expected value notions are introduced to cope with the uncertainty. A fuzzy logic controlled genetic algorithm is designed as a solution method to solve the above problem. Finally, the results of a case study for the carbon emission allowance allocation problem about China Southern Power Grid Company Limited are proposed to show the practicality and efficiency of the optimization method.

The Case against Carbon Prices

Since the establishment of a carbon emission allowance trading market for electricity to performed the carbon emission allowance trading is one of the optional ways to promote the low-carbon goals of China, this study proposes a ‘‘pan-bilateral’’ market mechanism for the electricity carbon rights trading by using the blockchain technology, and carries out the carbon rights trading with the ‘‘centralized declaration and matching, distributed matching and clearing The trading price of carbon rights with ‘‘centralized matching and unified clearing’’ is 255.31 yuan/t, and the actual trading carbon rights are 131.5 t. The seller’s actual trading volume only accounts for 50.63% of the total declared sales volume, and the buyer’s actual trading volume only accounts for 55.11% of the total declared purchase volume. Through the example analysis and system tests, the experimental results shows that the ‘‘pan-bilateral’’ trading mode proposed can bring benefits to the main body of carbon rights market, and the test efficiency can satisfy the demand of carbon rights trading in a certain range. The combination of’’pan-bilateral’’ market mechanism and blockchain technology provides the technical support of market and platform for the carbon rights trading, and reduce the market barriers and obstacles of carbon rights.

Carbon emission reduction dynamic decision-making in the electricity supply chain with different carbon emission allowance principles

Effective carbon allowance mechanism is the key to achieve the goal of carbon peaking and carbon neutrality.To solve the prominent problem of energy and environmental constraints, different allocation mechanisms have different potential impacts on the economy.This study first analyzes the relevant research on the carbon allowance mechanism in the power industry.On this basis, a new regional carbon emission allowance method (ZSG-DEA) for the electricity industry is constructed, and the influence of different carbon allowance mechanisms on provincial carbon emission, electricity transfer and economy loss are analyzed, to provide a scheme for China's electricity carbon emission allowance.

Emission trading and market mechanism have increasingly become crucial policy measures to promote sustainable development. Coupled with carbon emission reduction credit trading, carbon emission allowance trading under the cap-and-trade scheme is also steadily developing in China. To learn from the EU ETS’s experience, the paper applied the IRF-DCC model to explore the dynamic nonlinear relations between EUA and CER markets. Empirical results indicate that EUA and CER are dynamically and conditionally correlated both in the spot and future markets. Correlations of spot volatilities are highly instable and market dependent while correlations of future volatilities are relatively stable and independent.

Carbon pricing is about the explicit pricing of greenhouse gas (GHG) emissions, of which carbon dioxide is the most important. GHG emissions, which are normally measured in tonnes of carbon dioxide equivalent units, are responsible for global warming and hence the greatest environmental externality of our age. Carbon pricing is a mechanism for making society account for the external damage caused by carbon emissions in economic decision making. There are two main ways of pricing carbon dioxide emissions, either via a carbon tax or via the introduction of an emissions trading scheme whereby those emitting carbon into the atmosphere are required to surrender permits which reflect the quantity of emissions they are responsible for. These emission permits are tradeable and hence command a price and, in some respects, operate in a similar way to a carbon tax. Thus, we will discuss both carbon pricing and emissions trading, as the literature on both is closely related. Emissions trading exists for certain other pollutants (such as sulphur dioxide) and we will discuss some of the literature related to this. However, most of the literature on emissions trading relates to carbon dioxide emissions, as these are by far the most valuable traded emissions globally. The literature on carbon pricing and emissions trading is wide ranging and constantly being updated with new analyses. Much of the literature is written by economists who are seeking to apply market-based approaches to the solution of environmental problems. The article starts by looking at the general context in which carbon pricing and emissions trading sits before discussing introductory texts which relate to the subject and going on to introduce the relevant classic literature in environmental economics. It then proceeds to more applied literature, beginning with discussions of early examples of emissions trading and carbon taxation, before continuing to studies of the impact of carbon pricing and emissions trading and those which explain the nature of the schemes we observe. The article continues with literature which looks at the Europe Union Emissions Trading Scheme (EU ETS) for GHGs and other important carbon pricing schemes. It then moves on to the literature on the prospects for a global carbon price, on interactions with other climate policies, on distributional concerns about the imposition of a price on carbon. Finally, it concludes with an introduction to relevant official publications and sources of data on carbon emissions and carbon prices.

China launched a nationwide unified Emissions Trading System (ETS) in 2021 and issued the Interim Regulations on the Administration of Carbon Emissions Trading in 2024 to regulate trading activities. To examine the effectiveness of China’s ETS policies, this study collected dynamic high-frequency data from 915 trading days, spanning from 16 July 2021 to 29 April 2025, and constructed a policy evaluation model based on the double machine learning framework. The findings indicate that China’s ETS policies have significantly increased the total trading volume of carbon emission allowances. This result has passed a series of robustness tests. Mechanism tests show that China’s ETS trading policies have significantly increased the transaction price and trading volume of carbon emission allowances. Compared with ETS in other countries and regions, China’s ETS policies are characterized by effectiveness, stability, and incrementalism, which can promote the orderly and efficient operation of the carbon emissions trading market. By refining the time span of the data and introducing cutting-edge causal inference methods, this study summarizes the successful experiences in the supervision and development of China’s carbon emissions trading market, providing precise evidence and feasible insights for global climate action and the development of ETS in developing countries.

In recent years, the EU Emissions Trading System (EU-ETS) has introduced an economic perspective, such as market trading, to achieve greenhouse gas reduction targets established by each country and company. Gaming simulation is an educational technique used to model significant problems, such as the climate change. However, market transactions such as carbon allowance trading, require a large number of research participants. To enable the carbon emissions allowance trading market to involve even a small number of research participants, this study proposed the design of a web application to simulate the carbon emissions allowance trading market by research participants.

China's forest carbon sinks and mitigation potential from carbon sequestration trading perspective

Option pricing of carbon asset and its application in digital decision-making of carbon asset

Cities are the main spaces to study a low-carbon economy. This paper introduces basic concepts covering “tolerance of planning carbon emissions,” “inevitable carbon emissions” and “excessive carbon emissions,” then discusses the problem with optimal city carbon emissions under the condition of tolerance. Theoretical analysis and scenario analysis were employed. First, according to optimal allocation theory of resources, we discuss how optimal society carbon emissions take place. Then, the deviation of optimal city carbon emissions was explored and analyzed, which was mostly caused by the missing price of carbon emissions allowance, excessive carbon emissions, and so on. Third, we analyzed optimal city carbon emissions under different conditions, in which different types of tolerance were included. Results show that theoretical investigations on optimal city carbon emissions provide relative ideas for determining control index and optimizing control countermeasures. Policy implications include improving the control index of city carbon emissions through environment enhancement, setting a reasonable control index of city carbon emissions under the consideration of the relationship between city economy and its environment, and establishing trading allowance and compensation mechanism of city carbon emissions, etc.

An efficiency-based allocation of carbon emissions allowance: A case study in China