Research On The Dependence Structure And Risk Spillover Effect Between EU And Domestic Carbon Market

The international community had worked tirelessly to address the energy and environmental challenges,and the Glasgow Climate Convention had further emphasized the role of mar ket mechanisms in reducing carbon emissions.Carbon trading as an effective means to control greenhouse gas emissions has become an important policy too l for the international community to address carbon-neutral climate goals.Since the establishment of th e EU carbon trading system in 2005,more than 40 carbon trading systems have been established worldwide,of which the EU carbon trading system is the mo st representative.Since 2011,China has launched carbon emission trading pilot projects in Shenzhen,Shanghai,Guangdong,Beijing and other “Five cities”.On the basis of these pilot projects,China has started national online trading of carbon emission rights through the breakthrough of the power industry.In the context of global economic integration,whe ther there is dependence and risk spillover effect in carbon trading market at home and abroad has become a hot issue.Research on this issue is of grea t significance to investment decision-making,risk management and the healthy development of carbon mark et.On the basis of systematically combing the existing research and relevant theories,this paper selects EU EUA futures and China’s pilot carbon marke ts in Beijing,Shanghai,Hubei and Shenzhen as the research object.Firstly,combined with GARCH cluster model and Copula function,this paper studies the dependent structure characteristics between EU EUA futures market and domestic carbon market;Then,b ased on the optimal time-varying Copula function of dynamic dependence between carbon markets,the risk spillover of EU EUA futures market to domestic carbon market is estimated.Research findings:(1)The carbon market return series has the characteristic s of peak and thick tail,and GARCH cluster model can better capture the edge distribution of carbon market return series.(2)The optimal time-varying Copula function describing the dynamic dependent structure of EU EUA futures market and China’s carbon markets in Beijing,Shanghai,Hubei and Shenzhen is not exactly the same,which reflects the heterogeneit y of China’s regional carbon market.Among them,the time-varying Rotated Gumbel Copula is the optimal Copula function describing the carbon markets of EU,China’s Beijing and Shanghai,which shows a bottom tail dependent structure;The time-varying SJC Copula function is the best Copula function to describe the carbon market in the European Union and Hubei Province of China,which presents an asymmetric tail dependent structure;The time-varying Normal Copula function is the optimal Copula function to desc ribe the carbon market between the European Union and Shenzhen,China,which is a symmetric and tail asymptotically independent dependent structure.(3)Based on the optimal time-varying Copula function describing the dynamic dependence of EU EUA futures m arket and China’s carbon market,the risk spillover effect of EU EUA futures market on China’s carbon market is estimated.It is found that EU EUA futur es have risk spillover effect with Beijing,Shanghai and Hubei carbon markets,and there is no risk spillover effect with Shenzhen carbon market.The risk spillover intensity of EU EUA futures to China’s carbon market is as follows: Shanghai,Beijing,Hubei and Shenzhen.Based on the above conclusions,the paper finally puts forward countermeasures and sugge stions to prevent carbon market risks.