Risk Measurement Of Carbon Price In China From The Perspective Of Energy Price Fluctuation

Reducing carbon emissions while developing the economy has become a necessary choice for human beings to seek sustainable development.China has announced that its carbon dioxide emissions must peak by 2030 and strive to be carbon neutral by 2060.In 2015,China made the decision to build a national unified carbon market.Based on the real data of China’s carbon market,this paper explores the characteristics of carbon price fluctuation in China,looks for the factors affecting the risk of carbon price fluctuation in China,and constructs a model to measure the risk of carbon price fluctuation from the perspective of energy price fluctuation.It is of great practical significance to the construction and development of China’s unified carbon market.First of all,by comparing and analyzing the differences of industrial structure,the scope of carbon emission management and the actual trading data of various pilot provinces and cities,this paper selects Hubei and Guangdong carbon markets which have the best performance among all pilot carbon markets as the research object on behalf of China.The sample data of the empirical study are selected from the transaction prices of carbon emission rights in Hubei and Guangdong and the futures transaction prices of Chinese coking coal,Brent crude oil and Nymex natural gas from April 8,2014 to January 23,2020.According to the results of correlation test,the futures price of Brent crude oil has the greatest influence on the carbon prices of Hubei and Guangdong among compared to another two types of energy.Then this paper uses the move Hurst index based on R/S method to briefly analyze the volatility trend and risk of carbon price,the efficiency of carbon market.According to the calculation results of the move Hurst index,the trend of carbon price shows a high persistence,and the carbon price in China has a long-term memory,greatly influenced by its historical prices.Moreover,the ARMA-GARCH model is used to accurately describe the characterstics of the carbon price of Hubei and Guangdong respectively.It is found that,ARMA(3,3)-GARCH(3,1)can effectively describe the fluctuation characteristics of the carbon price of Hubei Province.ARMA(4,2)-GARCH(3,3)can effectively describe the fluctuation characteristics of the carbon price of Guangdong Province,indicating that the carbon price has the property of multi-period correlation.Furthermore,through calculation we find that,Frank Copula function is the optimal Copula function which can describe the correlation structure between the returns of carbon emission right of Hubei and the returns of crude oil futures of Brent,and t-Copula function is the optimal Copula function which can describe the correlation structure between the returns of carbon emission right of Guangdong and the returns of crude oil futures of Brent.Finally,based on the Copula-ARMA-GARCH model and different confidence intervals,we calculate:(1)the separate risks of Hubei carbon emission right returns,Guangdong carbon emission right returns and crude oil futures returns;(2)the integration risk of the carbon price of Hubei and the price of Brent crude oil futures based on Copula-ARMA-GARCH model,and the integration risk of the carbon price of Guangdong and the price of Brent crude oil futures based on Copula-ARMA-GARCH model;(3)arithmetic summation risk of Hubei carbon price and Brent crude oil futures price,and arithmetic summation risk of Guangdong carbon price and crude oil futures price.Then make a comparative analysis of them.It is found that the integration risk of carbon price calculated based on Copula-ARMA-GARCH model is lower than the simple sum of the risk of carbon price and crude oil futures price obviously,indicating that the risk of carbon market will be overestimated if energy prices are not taken into account.And at the same confidence level,by reducing the proportion of carbon assets in the portfolio,the overall risk of the portfolio will decrease,indicating that the potential risk of carbon price is greater than that of crude oil futures price.The empirical results show that if the degree of marketization of China’s carbon market is high enough,the participating companies involved in carbon trading will consider the price performance of the relevant markets more when making dealing decisions,so as to avoid risks to a certain extent.If China designs a more scientific and reasonable trading mechanism to enhance the degree of marketization of carbon trading,fully empower the self-regulation ability of the carbon market,risks in the national unified carbon market can be effectively prevented.