The market efficiency of carbon emission trading in China

Abstract

Emission reduction and energy conservation is a long-term and essential problem faced by the Chinese government. Carbon emission trading enables financial markets to price the right to emit greenhouse gases into the atmosphere. However, according to the research, there is still a considerable gap between the actual market efficiency situation and government goals presently. Therefore, this study is aiming to predict whether the current Chinese carbon emission trading market has reached the weak form of market efficiency. We focus on three related factors: 1) days of carbon price change, 2) transaction price, and 3) trading volume. Based on the results, we can conclude that there are regional differences in markets of carbon emissions trading. For instance, Beijing and Shanghai have the highest transaction prices, while Guangdong has the highest transaction volume. To sum up, the carbon trading market of China has achieved the efficiency of weak form on the whole, but due to the imperfect and immature factors in Fujian, the market is still inefficient, which reflects there is still a long way to go for the construction of the current market.