Forecasting the Carbon Price in China Pilot Emission Trading Scheme: A Structural Time Series Approach

  • Zhao Mengdi
  • Soo Keong YongEmail author


To curb carbon emission, the Chinese pilot carbon emission trading markets were implemented in 2013 to act as a testbed for the official establishment of national carbon market in 2017. As the potential largest carbon trading market in the world, finding the key factors that drive the carbon permit prices and forecasting its future prices are important for both investors and government. This study explores the prospect of forecasting the carbon permit price in three pilot markets (Beijing, Shanghai, and Shenzhen) using the structural time series modeling (STSM) approach. The result shows that this modeling approach potentially outperforms conventional time series model in forecasting capability. Statistically, the prices of energy sources are found to be uncorrelated with the permit prices in the Chinese pilot market, in contrary to the results from other studies on the European Union carbon market.


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Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.International Business School SuzhouXi’an Jiaotong-Liverpool UniversitySuzhouChina

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