The efficiency of carbon trading market in China: evidence from variance ratio tests

  • Jianguo Zhou
  • Xuejing HuoEmail author
  • Baoling Jin
  • Xuechao Yu
Research Article


On December 19, 2017, China’s National Development and Reform Commission (NDRC) announced the official launch of the much-anticipated national emissions trading system (ETS), which is a critical period for the transition from the eight carbon emission trading pilot projects to the national market at this stage. Comprehensively evaluating the efficiency of China’s eight carbon trading pilots is vital for strengthening the construction of its national ETS. This paper investigates the weak-form efficiency of eight carbon trading markets in China. We use a series of variance ratio tests to identify the efficiency from the market set up to the May 4, 2018, of all markets. The results indicate that the majority of the carbon trading markets are inefficient and only Beijing, Hubei, and Fujian markets are efficient. The China’s carbon trading market is gradually maturing and implemented. In addition, we analyze the factors have impact on the market efficiency. It shows that the liquidity, volume, allocation allowance, and transparency in information are significant factors; meanwhile, the regional policy and cross cooperation also are important factors. Finally, this paper puts forward several policy recommendations on how to strengthen the effectiveness of China carbon trading markets based on the empirical results.


Market efficiency Carbon trading market Variance ratio test 



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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Economics and ManagementNorth China Electric Power UniversityBaodingChina

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