Volatility Spillovers Among Chinese Major Carbon Markets

In order to reduce greenhouse gas emission,since 2013,seven regional carbon trading markets have been successively set up in China.The study on the volatility spillovers among Chinese major carbon markets will help to identify the leading market in price discovery during the prior stage and provide references for the further development of other regional markets and the establishment of the national carbon market.Firstly,this thesis analyzes and compares development status of the seven carbon markets in detail.Owing to small trading volume and discontinuous data of the Chongqing,Beijing,Tianjin and Shanghai carbon markets,this thesis selects three major carbon markets with the largest trading volume as sample,which are Guangdong,Shenzhen and Hubei respectively,employs the VAR and multivariate GARCH(1,1)-BEKK model to analyze the mean and volatility spillovers on Chinese carbon markets.To eliminate the effect of compliance,the samples are divided into two phases according to the compliance date: Phase I covers the period from July 1st,2014 to June 30 th,2015 and Phase II covers the period from July 1st,2015 to July 19 th,2016.The empirical results from the mean spillover tests show that,either in Phase I,Phase II or the whole sampling period,there is no significant mean spillover effect among the three carbon markets.The empirical results from the volatility spillover tests show that,during Phase I,there are significant spillover effects from Hubei to Shenzhen and Shenzhen to Guangdong,respectively.During Phase II and the whole sampling period,the spillover effect is only significant from Shenzhen to Guangdong.After that,this thesis explains the results according to the theoretical analysis.Firstly,there is no significant mean spillover among Chinese major carbon markets,which may be due to the natural market segmentation caused by regional segmentation and the artificial market segmentation caused by the policy design.Secondly,as the market efficiency test shows that the three carbon markets have not reached weak-efficiency,this thesis measures the non-efficiency degree of each market based on the multi-fractal test further.The results show that,the volatility spillover effects completely comply with the efficiency degree during Phase II but not during Phase I,which indicates the Chinese carbon markets are more mature in Phase II compared to Phase I,that is to say,Chinese carbon markets are gradually developing and perfecting.Finally,the thesis puts forward policy suggestions for the future development of Chinese carbon markets.