Time-frequency Connectedness between Coal Market Prices, New Energy Stock Prices and CO2 Emissions Trading Prices in China

• Published in: Sustainability 2020-04, Vol.12 (7), p.2823
• Main Authors: Jiang, Chun, Wu, Yi-Fan, Li, Xiao-Lin, Li, Xin
• Format: Article
• Language: English
• Subjects: Carbon dioxide; Climate change; Coal; Crude oil; Crude oil prices; Economic development; Emissions; Emissions trading; Energy; Energy consumption; Energy industry; Energy prices; Fossil fuels; Frequencies; Market prices; Natural gas prices; Stochastic models; Stock prices; Studies; Wavelet analysis
• ISSN: 2071-1050; 2071-1050
• DOI: 10.3390/su12072823

This paper aims to examine whether there is inherent dynamic connectedness among coal market prices, new energy stock prices and carbon emission trading (CET) prices in China under time- and frequency-varying perspectives. For this purpose, we apply a novel wavelet method proposed by Aguiar-Conraria et al. (2018). Specifically, utilizing the single wavelet power spectrum, the multiple wavelet coherency, the partial wavelet coherency, also combined with the partial phase difference and the partial wavelet gains, this paper discovers the time-frequency interaction between three markets. The empirical results show that the connectedness between the CET market price and the coal price is frequency-varying and mainly occur in the lower and higher frequency bands, while the connectedness between the CET market price and the new energy stock price mainly happen in the middle and lower frequency bands. In the high-frequency domain, the CET market price is mainly affected by the coal price, while the CET market price is dominated by the new energy stock price in the middle frequency. These uncovered frequency-varying characteristics among these markets in this study could provide several implications. Main participants in these markets, such as polluting industries, governments and financial actors, should pay close attention to the connectedness under different frequencies, in order to realize their goal of the production, the policymaking, and the investment.