Carbon emission trading under the wings of black swans and green swans: Evidence from China

In response to the potential green swans event in the future, China is adopting market-oriented means to encourage green development, specifically through carbon emission trading schemes. At the same time, under the outbreak of the current global pandemic, it is equally important to consider the impact of black swan events. Therefore, this study aims to analyse the fluctuations in carbon emission trading prices under green and black swan events by utilizing daily data from seven carbon emission exchanges in China from 2017 to 2020. The analysis includes the construction of multiple regression models, PVAR models, and panel threshold models. Additionally, the study addresses the endogeneity problem by using instrumental variables. The findings of the study indicate that: (1) Rising temperatures will drive up the carbon emissions trading price, and this impact will persist over time. On the other hand, increased humidity levels and sunshine hours will reduce the carbon emissions trading price. Furthermore, there is a positive correlation between the increase in the price of primary energy and the increase in the carbon emissions trading price. (2) The spread of COVID-19 has a restraining effect on the increase in temperature and will have a long-term negative impact on the carbon emissions trading price. (3) The threshold effect concerning the prevalence of pandemics is recognized, which implies that the impact of the epidemic is staged and nonlinear. Overall, the results of this article highlight the importance of a reasonable response to both black swan and green swan events in order to enhance the efficiency of the current emission trading scheme.