Can China’s Carbon Market Pilot Cope with Uncertainty Shocks?

This paper introduces a novel approach by explicitly considering the COVID-19 pandemic as an analytical framework for assessing uncertainty shocks. Focusing on average trading volume and average trading prices, the study quantifies the impact of the pandemic on the carbon market in pilot regions. It compares the market performance of these regions in response to the pandemic shock while incorporating existing response measures. Relevant variables are identified and applied in a partial correlation analysis model. The findings reveal a significant correlation between the extent of the pandemic's impact on the carbon market and factors such as the proximity to the contract expiration date and the level of pandemic risk. This study provides the first empirical evidence of the effectiveness of current measures in mitigating the pandemic's impact on the carbon market. Additionally, recommendations are proposed for further optimizing response strategies.