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The Spillover Effect between Carbon Emission Trading (CET) Price and Power Company Stock Price in China

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  • Yanbin Li

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China
    Beijing Key Laboratory of New Energy and Low-Carbon Development, North China Electric Power University, Beijing 102206, China)

  • Dan Nie

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China
    Beijing Key Laboratory of New Energy and Low-Carbon Development, North China Electric Power University, Beijing 102206, China)

  • Bingkang Li

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China)

  • Xiyu Li

    (School of Environment, Education & Development, The University of Manchester, Manchester M13 9PL, UK)

Abstract

The power sector is one of the major contributors to China’s carbon emissions, and its low-carbon transformation is of vital importance to China’s long-term sustainable development. This paper aims to investigate the spillover effect between the carbon emission trading (CET) market and power sector in China from a systematic perspective. We adopted the recently developed method of connectedness network and rolling window approach, and found that: (i) during our sample period, the total static spillover index and the average of total dynamic spillover indexes were 60.5735% and 57.9704%, respectively, and the spillover effect of this carbon-power system was relatively strong; (ii) there is weak bidirectional spillover effect between the CET market and the power sector, and the CET market is a net receiver of the information from the power sector; (iii) the CET market may exert a relatively high degree of impact on the power sector occasionally; (iv) for regulated power companies, their interactions with the carbon-power system may be related to its total holding installed capacity and the proportion of renewable energy installed. This study provides implications for policymakers, company managers, and market participants.

Suggested Citation

  • Yanbin Li & Dan Nie & Bingkang Li & Xiyu Li, 2020. "The Spillover Effect between Carbon Emission Trading (CET) Price and Power Company Stock Price in China," Sustainability, MDPI, vol. 12(16), pages 1-17, August.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:16:p:6573-:d:398804
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    Cited by:

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    3. Chen, Zhang-HangJian & Ren, Fei & Yang, Ming-Yuan & Lu, Feng-Zhi & Li, Sai-Ping, 2023. "Dynamic lead–lag relationship between Chinese carbon emission trading and stock markets under exogenous shocks," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 295-305.
    4. Jing Deng & Yujie Zheng & Yun Zhang & Cheng Liu & Huanxue Pan, 2023. "Dynamic Spillovers between Carbon Price and Power Sector Returns in China: A Network-Based Analysis before and after Launching National Carbon Emissions Trading Market," Energies, MDPI, vol. 16(14), pages 1-27, July.
    5. Mengli Xia & Zhang-Hangjian Chen & Piao Wang, 2022. "Dynamic Risk Spillover Effect between the Carbon and Stock Markets under the Shocks from Exogenous Events," Energies, MDPI, vol. 16(1), pages 1-15, December.
    6. Pietro De Ponti & Matteo Romagnoli, 2022. "Financial implications of the EU Emission Trading System: an analysis of wavelet coherence and volatility spillovers," Working Papers 2022.22, Fondazione Eni Enrico Mattei.
    7. De Ponti, Pietro & Romagnoli, Matteo, 2022. "Financial implications of the EU Emission Trading System: an analysis of wavelet coherence and volatility spillovers," FEEM Working Papers 323874, Fondazione Eni Enrico Mattei (FEEM).
    8. Sun, Xiaotian & Fang, Wei & Gao, Xiangyun & An, Haizhong & Liu, Siyao & Wu, Tao, 2022. "Complex causalities between the carbon market and the stock markets for energy intensive industries in China," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 404-417.

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