Quantile Connectedness Between Carbon Emission Allowances and Commodity Futures Markets: Evidence from China

Carbon pricing is central to China’s low-carbon transition, and its effectiveness is tied to the carbon market’s links with commodities. This paper examines state-dependent return connectedness between China’s national carbon emission allowance (CEA) market and 20 representative commodity futures. Using daily data from July 2021 to February 2026, we combined quantile vector autoregression (QVAR) connectedness, the Baruník–Křehlík frequency decomposition, and wavelet-based coherence and quantile-based correlation methods to characterize return transmission across market states and frequencies. We obtained four findings. First, total connectedness is almost identical at the lower and upper tails (around 92%) and far higher than at the median (around 59%)—tail symmetry with median heterogeneity—and is dominated by the short-term band. Second, the CEA is largely decoupled from the commodity system under normal conditions and is drawn in only at the tails as a net receiver. Third, the two tails exhibit distinct event contexts, with downside episodes associated with external financial shocks and upside episodes associated with domestic policy expectations. Fourth, the CEA tends to precede high-emission commodities at long horizons. These results suggest that institutional and policy factors continue to play an important role in shaping CEA price dynamics, with implications for carbon market regulation and cross-market hedging.