The carbon price in the national carbon market has once again exceeded the 100 yuan mark. On September 24th, the opening price of the national carbon market was 95.22 yuan/ton, with the highest price reaching 100.60 yuan/ton, the lowest price at 95.22 yuan/ton, and the closing price at 100.37 yuan/ton, which is a 5.41% increase compared to the previous day.
Previously, on April 24th of this year, the carbon price historically broke the 100 yuan mark for the first time and reached its highest price of 103.47 yuan/ton on April 29th. After surpassing 100 yuan/ton, the carbon price maintained a high level for a period until it fell back in mid-May, maintaining a high level of over 100 yuan for more than three weeks.
Since the opening of the national carbon market, the carbon price has shown a trend of slight fluctuations and steady upward movement. The comprehensive closing price of the second compliance period (2021, 2022) fluctuated between 50 yuan/ton and 82 yuan/ton. In the third compliance period (2023, 2024), after breaking the 100 yuan mark and then falling back, the price has once again exceeded 100 yuan, more than doubling from the initial price of 48 yuan/ton.
Is there a cyclical pattern to the fluctuations in carbon prices?
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Five months after the carbon price broke the 100 yuan mark again, it has sparked an exploration of the rules governing the increase in carbon prices. Is there a cyclical pattern to the fluctuations in carbon prices?
According to research, the spillover effects of returns and volatility between regional pilot carbon markets in China exhibit time-varying, volatile, uncertain, and cyclical characteristics. In particular, the return spillover index of the carbon market experiences a cyclical fluctuation that first rises and then falls around the compliance period in June each year, while the volatility spillover index shows a "M" shaped cyclical trend of "front peak - middle valley - back peak" from before the compliance period to after it each year.
In addition, policy changes, market demand, and seasonal energy consumption peaks also affect the cyclical changes in carbon prices. For example, in August, the activity in the national carbon market increased, with the total transaction volume and total transaction amount increasing by 67.94% and 59.12% respectively compared to July, and the average transaction price of CEA was about 91 yuan/ton, a 5.54% increase from July. This indicates that, in addition to the cyclical compliance factors, market activity and policy changes are also important factors affecting the cyclical nature of carbon prices.
Carbon price fluctuations are influenced by a variety of factors, including the supply and demand relationship of quotas within the market, abatement costs, adjustments to policy systems, as well as macroeconomic development, energy prices, and meteorological factors outside the market. According to new policy arrangements, the compliance time for the national carbon market has changed from a two-year compliance period to an annual one, which may increase the market's demand for carbon quotas, thereby driving up prices. Additionally, as the pace of including key emitting industries such as cement and aluminum smelting in the national carbon emissions trading market accelerates, the market expects the coverage of the carbon market to further expand, and this positive information has also driven up carbon prices.
In the long run, it will surely rise steadily.
The carbon price breaking the 100 yuan mark again reflects the maturity of China's carbon market and the effectiveness of market mechanisms. With the continuous development and improvement of China's carbon market, it is expected that the carbon price will continue to maintain a trend of steady rise.Since the beginning of 2024, it can be observed that even without the need for quota clearance, participants have increasingly reserved or sold carbon quotas. This reflects the rational allocation of emissions and quotas by different participants. The activity during the non-compliance period indicates market participants' recognition of the carbon market, their acknowledgment of the value of carbon quotas, and the market's gradual maturation.
The clear expansion of the carbon market for cement, aluminum electrolysis, and steel has a positive impact on carbon prices. Expansion will increase the number of market participants, thereby enhancing transaction activity. It is estimated that after the expansion, approximately 1,500 new enterprises will join the carbon market, which will increase transaction volume and potentially drive prices upward.
Secondly, the market supply and demand for China Certified Emission Reductions (CCER) are becoming more "tight." On September 2nd, the first batch of CCER projects was officially listed online. The first batch of listed CCER projects plans to reduce emissions by over 70 million tons, which is a positive signal indicating the market's future development and potential. This will be mutually beneficial for the trend of carbon prices, with investment institutions treating CCER as a new type of financial product for investment operations. It is expected that this batch of CCER still has significant appreciation potential, and carbon prices are also expected to rise further.
Finally, the official operation of the "Carbon Border Adjustment Mechanism" in the European Union and other places, along with the significant "carbon price gap" between domestic and international markets, is also a driving force for further increases in domestic carbon prices.
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