Risks Of Trading Market In Carbon Finance And Their Controls In China

Progress in contemporary human society is mainly reflected in technologicaladvances, and to promote the essence of technological progress is behind the idea oftechnological progress. Carbon finance technology is a branch of modern financialtechnology, financial technology is a means to promote energy conservation, is tobetter serve the modern financial innovations human solid economic development.The core of modern financial management and development is risk management, andcarbon finance market risks and prevention technology is the core technology ofcarbon finance management and development. Therefore, the study of "carbonfinancial market risks and prevention" has important theoretical significance.At the beginning of21st century, the global weather and climate extremes fogand haze makes humans ever increasing attention and importance of low-carboneconomy. Especially the December11,2010, the Sixteenth Party Climate ChangeConference in Cancun,"the United Nations Framework Convention on ClimateChange" was held among the participating countries to further deepen theunderstanding of global warming； since2011, the world’s extreme weather multiple,multiple national PM2.5continuous emergence of new high； since2013, large areasof China in some areas of fog and haze duration highs；2014as the United States theworld’s biggest carbon emitters China and the world’s largest developing countries toreach China the "greenhouse gas emissions reduction agreement." According to theagreement of the two sides, China’s greenhouse gas emissions and strive to decreasefrom about the beginning of2030, this reduction targets will bring great opportunitiesChina’s carbon emissions market. Therefore, to accelerate the establishment of Chinese carbon market and with suitable carbon finance system, the implementationof carbon finance development strategy has important practical significance andlong-term strategic significance. At the same time a growing number of experts,scholars and government officials issued a report and suggestions: carbon financialinstruments to support energy conservation, industrial restructuring, to resolveovercapacity and solve the environmental crisis.From an international perspective, the human face of the long-term challenges ofclimate change, the need for the real economy through industrial restructuring, energyconservation and clean energy innovation and high energy consumption and highpollution, high-carbon alternative energy and other ways to achieve sustainabledevelopment of science. Finance is the core of the economy, finance and technologycan play in serving the real economy to promote, regulate and guide, to achieveeconomies of industrial restructuring, energy conservation and the development ofclean energy innovation. Financial technology play such a role is to rely on carbontrading and carbon finance innovative financial products, so in the internationalcarbon finance market with the advent of carbon emissions trading emerged.Carbon finance is the way to solve the financial problems of the real economy, isto seize the main contradiction, caught the core, but with carbon emissions tradingand carbon finance solutions to low-carbon economic development, just be able toguide and solve the world as well as the industrial structure, China’s economicstructure, and even change our human economic development model, consumptionpatterns, and will even change our lifestyle, these changes will make the game go livea carbon finance and sustainable development of China’s low carbon economy fullgame all win.Core financial management, risk management, carbon finance is relying on thefinancial behavior of carbon emissions trading, and therefore the scope of carbonfinance as a financial management and innovation at its core is bound with risk identification, risk analysis and control prices closely. Thus, the development of goodcarbon finance market must first clarify the risk of carbon finance market, and thenon the basis of risk pricing model, by inverse modeling approach to design differentrisk characteristics of the market and sell products and derivatives, the risk of suchcarbon finance transactions can be more controllable, the transaction can be moreabundant varieties.China’s current system is imperfect carbon finance, carbon finance system andrelated measures for the development lag. China wants to develop the carbon financemarket risk must be controlled well, the only way, policy makers and regulators, andthe interests of stakeholders carbon financial products based on the risk model wasable to control the risk of carbon finance market can be more prosperous, better toplay its role in the development of the real economy, the service is good.In recent years, international markets, including China certified emissionreductions CCER (English called Chinese Certified Emission Reduction,), the CleanDevelopment Mechanism CDM (English called the Clean Development Mechanism),carbon funds, carbon tax, carbon emissions Spot and carbon futures and otherfinance-related business innovation are emerging. At present, Chinese traditionalenergy in the process of economic development to occupy more than80%of energyconsumption, high-energy, high-level radioactive discharge, high pollution and lowefficiency in the case of sustainable development of China’s economy is facingserious challenges. Therefore, China urgently needs to explore the establishment of alow-carbon economy for supporting the development of carbon finance market.We market carbon emissions trading and financial activities collectively referredto as carbon finance market. In recent years in the country, has set up a carbonexchange to carry out carbon emissions trading in Beijing, Tianjin, Shanghai,Chongqing, Shenzhen, Guangdong, Hubei and other seven provinces. With theestablishment of these seven carbon emissions trading market, China’s carbon finance trading products continue to emerge, the risk of price fluctuations and other tradingproducts also exposed. Therefore, people in the carbon emissions trading market pricevolatility and risk exposure, further deepened the financial risks of carbon trading andcarbon awareness and attention, but China’s carbon trading market risk and financialcontrol systems are still lacking and cognitive science. In the background of thisdevelopment, unified China carbon finance market, the risks and prevention, much tothe concern.In this paper, the development of carbon finance economics analyzes the tradingpatterns of domestic and international carbon finance, trading tools, and derivativeproducts, from carbon finance market system, in-depth analysis of the scientificclassification of market trading risk, the risk of price fluctuations in the marketcombined with the experience of developed countries, put forward policy proposalsrisk and prevention of the development of carbon finance market, and to improve theseven Chinese provinces and regional emissions trading agencies and national unityof the internal control system of carbon trading system and platform constructionfinance has practical significance, meanwhile, further important guiding role throughinnovative risk model is proposed based on inverse modeling of carbon financeinnovation theory and example applications, will promote the healthy development ofthe carbon finance market. The full text of this research paper is divided into sixchapters, the main contents are as follows:Part I: IntroductionThis section talks about the domestic and foreign academic economic theory oncarbon, carbon reduction policy tools, the cost of carbon trading theory, the theory offinancial support, carbon sinks to carbon finance economic hedge risk theory, riskasset pricing theory, behavioral finance, game theory and information theory,economics, economics, reverse modeling technology products, Basel II market riskanalysis theory on the basis of combing conduct in-depth research to fully draw on the useful value of the relevant economic and financial theory, and strive to makecarbon finance-related new ideas, perspectives for the study of Chinese carbonfinance market risk identification and control theoretical basis.Part I I: Review of carbon finance related financial and economic theoryThis section selected financial and economic theory of carbon involved in thedevelopment of the financial market, the theoretical basis of the relevant sort ofcarbon trading, including transaction cost theory, welfare economics, environment,finance theory； combing carbon financial risk control theory, including carbonfinance risk classification, assessment and risk management, prevention and controlof carbon finance, carbon finance risks； analysis of the factors affecting the price ofcarbon finance products including the impact of the carbon price demand factors, theimpact of the carbon price policy factors, the impact on carbon emissions quotaprice； also analysis of financial markets and wind control other carbon-relatedrationale may include behavioral finance, game theory and information economics,reverse modeling technology products, Basel II market risk analysis theory. Riskresearch by summarizing and refining the above theory for carbon finance market isfurther laid the theoretical foundation, and derive inspiration innovation.Part III: Development of domestic and international carbon finance trading andrisk management and controlThis section summarizes the specific status of the international carbon tradingmarket, including background carbon markets and carbon finance the formation of aninternational carbon market development status and problems； analysis of thedevelopment of China’s carbon trading market, from our CDM market overview,China’s carbon market analysis of the status quo of China’s carbon finance dilemmafaced by trading mechanism； then analyzes the key risk structure of the carbonfinance market, including major risks and uncertainties risk, liquidity risk, politicalrisk, fraud risk. And in the EU, for example on the carbon trading market risk management and control mechanisms are discussed cite the case, including carbonfinance risk oversight mechanism, financial risk control mechanism of carbon andcarbon financial risk coping mechanisms.Part IV: An Empirical Analysis of carbon finance transaction risksThis section features a carbon price of financial products for our existingregional carbon finance market is analyzed in-depth analysis of the causes leading tothe risk, and learn the principles of risk analysis under the Basel II framework, thefinancial risk of carbon trading market system analysis. Through empirical analysisand testing and research to obtain carbon trading market price fluctuations in financialrisk prevention, risk aversion and price risk management ideas.Part V: Based on value at risk VaR (English full Value at Risk) model andconditional value at risk CVaR (English called the Conditional Value-at-Risk) risk ofcarbon finance market model MeasurementThis section reviews the common risk measurement model, focusing on the VaRmodel with CVaR model were compared and analyzed, and the two models ofdifferent calculation methods were compared. Finally, based on the regional market ofcarbon finance transaction empirical comparison of VaR and CVaR value, but alsopointed out the CVaR method of analysis of the carbon trading market riskmeasurement problems in the application..Part VI: Suggestions on carbon risk management and control of financialtransactionsThis section analyzes the reasons for the formation of carbon-based financialmarket risks, targeted financial transactions on China’s carbon risk management andcontrol by improving the legal framework, strengthening policy guidance, to buildstandardized carbon trading market system；the use of technology to establish a strictcarbon finance risk prevention and control system； build a unified carbon marketand other countermeasures gradual, and carbon finance market construction specifications reunification of China, the main measures and recommendationsproposed effective prevention and control of carbon financial market risk shouldfocus on construction.