Research On Carbon Market Bubbles Based On LPPL Model

According to the ASSESSMENT of the United Nations Intergovernmental Panel,mankind’s continued carbon emissions are the main cause of global warming.Due to the great threat posed by climate warming to human beings,countries around the world have joined the Kyoto Protocol and The Copenhagen Agreement to jointly deal with the issue of climate warming.As the world’s largest carbon emitter,China has always assumed the responsibility of a major country in carbon emission reduction.Since 2013,China has carried out pilot carbon trading in eight provinces and cities.By 2020,China’s pilot carbon market has become the second largest in the world in terms of quota trading volume.In September 2020,General Secretary Xi Jinping proposed the "dual carbon" goal of peaking and becoming carbon neutral by 2030 and 2060 respectively.Under the background of "dual carbon",the unified national carbon market will be officially established on July 16,2021,which means that China’s carbon market will replace the EU carbon market and become the largest carbon market in terms of trading scale.At present,China’s carbon market is still in the stage of development,the price regulation mechanism is not perfect,the market maturity is not high,the market system and laws and regulations related to carbon trading are still not perfect,the carbon market price is prone to violent fluctuations,the rise and fall of carbon trading price will also bring huge challenges to market traders and regulators.Since the subprime crisis,the bubble in the financial market has always made investors wary,and China has paid more attention to financial security.It is worth pondering whether carbon markets are as frothy as capital markets.According to the theory of self-organized criticality,there are many self-organized systems in nature,and each part of the system has its own dynamic mechanism to develop to the critical state spontaneously.At this time,even a small change can cause a huge collapse of the system,such as earthquake,avalanche,financial market crash,etc.Based on this theory,Sornette et.al(1995)applied the logarithmic periodic power law(LPPL)model to the stock market to study and predict bubbles in the stock market.In order to explore whether there is a bubble in China’s carbon market and study its bubble status,this paper,under the guidance of fractal market theory and self-organized criticality theory,excluded the carbon markets in Fujian,Tianjin and Chongqing with low carbon quota trading volume and low carbon trading volume and low activity from the data selection.Choose Beijing,Shanghai,Guangdong,Shenzhen,Hubei five pilot carbon market and carbon market closing price of the nation’s data,through a graphical test,Q-Q figure test,descriptive statistics analysis,K-S test and R/S analysis of fractal characteristics of the test samples.If the carbon market satisfies the distribution characteristics of fractal structure,the LPPL model can be further used to fit the carbon price,analyze the bubble state of China’s carbon market price,and further study the correlation of bubbles among carbon markets.Results show that the yield of carbon market in China is the distribution features of the "rush thick tail",the pilot carbon market performance for complex nonlinear systems,and pilot carbon markets exist obvious foam and the inversion of the state,and national carbon market due to the number of samples is less,and trading is more active,so the carbon price relative to pilot the carbon market is stable,There were no obvious booms and busts;The bubble correlation between China’s carbon markets is low,and the segmentation of carbon markets is obvious.After the establishment of the national carbon market,the bubble correlation between carbon markets is further weakened.Based on the above conclusions,this paper puts forward relevant suggestions from the perspective of stabilizing carbon price.First of all,the transparency of the carbon market should be improved to ensure the true,accurate and transparent accounting of carbon emissions of enterprises,and the construction of information disclosure management system should be strengthened.Secondly,the implementation mechanism of carbon market should be improved so that enterprises can reasonably plan carbon resources and participate in carbon market trading in advance.The government can improve the enthusiasm of control and emission enterprises to participate in the market through innovation in carbon trading and the establishment of corresponding incentive mechanism.In addition,a carbon market price stabilization mechanism should also be established.Early warning measures should be taken in advance for different risks,and a differentiated risk feedback mechanism should be established.When there is a large price fluctuation in the market,the market price should be stabilized through reasonable government intervention.Finally,we should improve the activity of the carbon market and increase the trading efficiency of the carbon market,so as to form a stable and fair carbon market price.