The Complexity And Causality Analysis Of China’s Pilot Carbon Markets And Coal Market

Since the industrial Revolution,the development and use of large amounts of fossil fuels has caused the increase of greenhouse gases in the atmosphere with the rapid development of society.As a responsible country,China has been establishing pilot carbon markets since 2013 in order to effectively mitigate the increasing global greenhouse gases.Most of China’s carbon emissions come from burning fuels like coal,oil and natural gas,and more than half of these emissions come from burning coal.The carbon and coal markets are closely linked,influencing each other in a complex way.Therefore,it is of great significance to study the relationship between the carbon market and the coal market.Sample entropy is used to analyze the complexity of China’s pilot carbon market and coal market.At the same time,the nonlinear Granger causality index is used to study the causal relationship between markets.Then,transfer entropy is used to quantify the information transfer between markets before and after COVID-19,and further judge the interaction between markets.The main research contents are as follows:(1)The complexity of China’s pilot carbon and coal markets.In this paper,the sample entropy research results show that the complexity of the coal market is relatively high,while the complexity of the pilot carbon markets is relatively low.China’s pilot carbon markets are not mature.Guangdong,Hubei and Shenzhen carbon markets are developing better than other carbon markets.(2)The causal relationship between China’s pilot carbon and coal markets.Firstly,the linear Granger causality index between the two markets is calculated,and the results show that Hubei and Shanghai carbon markets affect the coal market.Secondly,the results of non-linear Granger causality index between the two markets show that the influence of the coal market on the pilot carbon markets is greater than that of the pilot carbon markets on the coal market.Then,the effects of different time scales on causality are studied,with coal market influencing pilot carbon market on short-term and long-term time scales.However,on a medium-term time scale of τ = 20(about one month),Guangdong,Hubei and Shanghai carbon markets influence the coal market more than the opposite direction.Finally,the dynamic Granger causality index between markets is calculated,and it is found that the causality between markets is affected by special crises and policies.(3)The synchronization and messaging between markets before and after COVID-19.Firstly,the synchrony between the pilot carbon market and coal market is measured by cross sample entropy.The results show that there is synchronization between markets,and the synchronization between markets after the epidemic is lower than before the epidemic.Secondly,transfer entropy is used to study the information transfer between the pilot carbon markets and the coal market.It is found that the pilot carbon markets affect the coal market before COVID-19,and the coal market affects the pilot carbon markets after COVID-19,and the impact of the seven pilot carbon markets on the coal market is ranked.Finally,the information transmission between China’s pilot carbon markets before and after the epidemic is analyzed,and it is found that the pilot carbon markets in China are dominated by Hubei carbon market before the epidemic,and Guangdong carbon market after the epidemic.