Influencing Factors and Prediction of Carbon Trading Market Prices in China via Elliptical Factor Analysis

In this paper, the authors take Hubei carbon trading market prices as a sample, and select 27 variables from five aspects: International carbon market prices, energy prices, the macroeconomic situation, exchange rate factors and climate environment. The authors construct the elliptical approximate factor model and use a robust two step method based on multivariate Kendall’s Tau matrix to extract common factors, identify the influencing factors of carbon prices, make out-of-sample forecasting of carbon prices, and compare with the prediction based on the historical mean of carbon trading market prices. The results show that the prediction of carbon trading market prices using elliptical approximate factor model is more accurate than the prediction based on the historical mean of carbon trading market prices. Among them, fossil energy prices, international carbon prices and climate environment are important influencing factors of carbon trading prices.