Spillover Effects Between EU-ETS And The Oil And Gas Industry Empirical Research

Technological advances and industrial development have led to the modernisation of human society,but have also brought environmental issues to the forefront.The massive emissions of greenhouse gases have increased the temperature of the planet,creating a challenge for the survival of many living creatures,and a carbon emissions trading market has been created to control carbon emissions.Oil and gas energy,the mainstay of current energy consumption,will remain the main energy feedstock for a long time to come.The linkage between the carbon market and the oil and gas market is an important consideration for the development of the carbon market and the risk management of the oil and gas market.This paper takes the more mature EU carbon market as the research object,divides the oil and gas industry market into two parts: the oil and gas energy market and the oil and gas stock market,combines theoretical analysis with empirical analysis to explore the spillover effects between the carbon market and the oil and gas industry market,and puts forward reasonable suggestions for the construction of a comprehensive carbon market in China.Firstly,a VAR model is developed to investigate the mean spillover effect between the carbon market and the oil and gas market.The results are that the oil and gas energy market and the oil and gas stock market are the Granger causes of the carbon market,indicating that the oil and gas industry market has a unidirectional mean spillover effect on the carbon market;the impulse response plots further indicate that the shocks brought about by this spillover effect last for two periods in total,reaching a maximum at the first lag and then starting to decline until they disappear at the second lag.Secondly,a DCCGARCH model was established to study the volatility spillover effect between the two markets.Through the dynamic correlation coefficient,it can be obtained that the size of the volatility spillover between the two markets becomes more stable as the EU-ETS gradually matures and shows an increasing trend.Finally,the study found that,due to the supply surplus,the carbon market price is more influenced by the demand side,while many factors such as energy consumption change,enterprise technology innovation and oil and gas company transformation make the spillover effect direction from the oil and gas market to the carbon market.It is believed that when building a comprehensive carbon market in China,the first step could be to adopt the "grandfathering method",as in the case of the EU-ETS,and at the same time to avoid a supply surplus that would make the carbon market ineffective.