Research On Price Discovery And Price-Volume Relation Of European Cabon Emission Market

To the threaten of global warming, the "Kyoto Protocol" was adopted in1997, which allows thetrade of a new financial product-carbon emissions develops rapidly. Through the carbon market,low-cost carbon reduction in regional or global scale can be achieved. This paper introduces thedevelopment of carbon emissions market, and analyzes the futures product price of the EuropeanClimate Exchange, the world’s largest carbon emissions market.This paper introduces the concepts and theories of carbon emissions market, including the CoaseTheorem and the emissions trading system. Then, it analyzes the present situation of carbon emissionsmarket, and give a comprehensive overview of current global carbon market structure, particularly theEU carbon market, as well as the development of financial derivative products of carbon status. Thepaper studies the relevant functional theory for future market, especially the price discovery function.The paper conducts the empirical analysis for relationship between futures and spot price of keycommodities from carbon trading market with Quantitative Research Methods. And it tests whether thecarbon futures market has got the traditional price discovery function. It has reference significance forthe effectiveness of carbon market, and establishment of China’s future carbon emissions market. And itexamines the relationship of price and volume of carbon futures market. The dynamic relationshipamong price, trading volume and open interest is studied to guide investment in carbon futures.China’s current carbon trading market has a lot of problems like, trading only in OTC business, thelack of price mechanism, which significantly result in trading price much lower than the internationalmarket prices. We can learn from the successful experience of the operation of the carbon market, andestablish a market with a complete trading market structure, to promote the formation of the pricediscovery mechanism.The paper lastly conducts an exploratory analysis for China based on EU market research, which isa kind of application research. Firstly, it conceives the component elements of the future carbon market,and then respectively discusses the pricing mechanism of initial primary market in emission rightsauction, supply and demand in secondary market and carbon derivatives. Finally, as for the carbonfutures market, we put forward the specific recommendations of how to establish and improve thecarbon futures market.