Examining the linkage between economic policy uncertainty, coal price, and carbon pricing in China: Evidence from pilot carbon markets

Wang, Jiqiang; Dai, Peng-Fei; Chen, Xihui Haviour; Nguyen, Duc Khuong

Abstract

Economic policies affect companies’ production decisions. And the energy consumption volume is an intuitive reflection of the enterprise’s production decisions. In China, coal is the main source of carbon emissions and the most important energy source. Therefore, the coal market and the uncertainty of economic policies are both directly tied to the carbon market. This study explores both the direct impact of economic policy uncertainty and coal price on carbon prices as well as the indirect impact of economic policy uncertainty on carbon prices through coal prices by utilizing the DCC-GARCH model and the NARDL model. The findings indicate that the dynamic correlations between coal prices and the CEPU are always negative and that those between the price of carbon and the CEPU vary by area. Meanwhile, the dynamic correlations between coal and carbon prices are only positive in Shenzhen and Beijing. Both coal prices and economic policy uncertainty produce asymmetrical impacts on carbon prices. Some policy implications are provided for developing the carbon markets in light of the results drawn from the study.

Citation

Wang, J., Dai, P.-F., Chen, X. H., & Nguyen, D. K. (2024). Examining the linkage between economic policy uncertainty, coal price, and carbon pricing in China: Evidence from pilot carbon markets. Journal of Environmental Management, 352, Article 120003. https://doi.org/10.1016/j.jenvman.2023.120003

• Journal Article Type: Article
• Acceptance Date: Dec 30, 2023
• Online Publication Date: Jan 13, 2024
• Publication Date: Feb 14, 2024
• Deposit Date: Mar 4, 2024
• Publicly Available Date: Jan 14, 2026
• Journal: Journal of Environmental Management
• Print ISSN: 0301-4797
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 352
• Article Number: 120003
• DOI: https://doi.org/10.1016/j.jenvman.2023.120003
• Keywords: Management, Monitoring, Policy and Law; Waste Management and Disposal; General Medicine; Environmental Engineering
• Public URL: https://keele-repository.worktribe.com/output/760866
• Additional Information: This article is maintained by: Elsevier; Article Title: Examining the linkage between economic policy uncertainty, coal price, and carbon pricing in China: Evidence from pilot carbon markets; Journal Title: Journal of Environmental Management; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jenvman.2023.120003; Content Type: article; Copyright: © 2024 Elsevier Ltd. All rights reserved.