A Study On Reasons For Illiquid Guangdong Carbon Market

The carbon market has become the most cost-effective means of dealing with increasing concerns regarding the need to reduce the greenhouse effect. As the biggest of the seven Chinese carbon-trading pilots and the second largest carbon market in the world. Guangdong carbon market will have an enormous effect on the construction of China’s national unified carbon market in 2017 and on solving China’s and even the world’s environmental and climate problems. However, the Guangdong carbon market has been quite unstable for the two years for which it has been in operation. It faces issues in the areas of frequently changed policies, large price fluctuations, and seriously periodic transactions during normal trade periods. Compared with the Hubei carbon market, there is still a lot of work that needs to be done to improve Guangdong carbon market liquidity.Considering the limited researches specially on carbon market liquidity and even the Guangdong’s carbon market globally. This paper is mainly focusing on Guangdong carbon market liquidity, which firstly compares several typical measurement methods on market liquidity, selects one that can be applied in measuring Guangdong carbon market liquidity to be improved further. And then, this paper measures Guangdong carbon market liquidity in this method and conducts simple analysis. Besides, this paper adopts empirical research through the comparative analysis, on the one hand measures Hubei’s carbon market liquidity and then compare it to Guangdong’s, on the other hand compares the influencing factors of carbon market liquidity of Guangdong and Hubei from carbon policy, carbon allowance, carbon trading rules and carbon finance. Finally, this paper conclude following reasons why Guangdong’s carbon market liquidity is worse than Hubei’s: the serious separation of the primary and secondary markets, lack of openness in the secondary market, dearth of adequate investors, poor consideration of the distribution and collection of emission allowances,unreasonable carbon finance product structure, and backward trading mechanism. In the end, this paper put forward some suggestions and proposals on the basis of the special problems identified in the analysis, such as strengthening binding force of policies and regulations, attracting more investors to take part in the market, tightening carbon allowance distribution and maintaining the price link of the primary and second market, adjusting carbon finance structure and so on.