Investor attention and carbon return: evidence from the EU-ETS

Self Cite

Introduction: The global pandemic since 2019 has caused crushing blow to healthy economic developments, particularly the harmonious development of environment and economy. Given the violent contradiction between health and economy, this study focuses on the controversial relationship between inflation and important environmental indicators.Methods: Specifically, we collect monthly data on inflation and carbon returns from three representative pilots in China and make a comprehensive investigation of the relationship between carbon and inflation within the framework of the Environmental Kuznets Curve (EKC).Results: Some significant empirical results are found. First, inflation shows a linear impact on carbon returns, despite the signals of inflation vary in pilots. Second, there exists an inverted U-shape connection in Shenzhen and Guangdong pilots. Third, inflation appears to be a non-negligible factor in pilot fluctuations, despite differences exist among pilots.Discussion: Considering the pressing targets of carbon peaking and carbon neutrality in China, this investigation provides important implications to policy makers in implementing differentiated policies across regions, particularly in the turbulent situations caused by frequent climate policy changes and global pandemic developments.

Section: Linear Model Specification Between Inflation and Carbon Returnmentioning

confidence: 99%

Section: Linear Model Specification Between Inflation and Carbon Returnmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Trade-off between environment and economy: The relationship between carbon and inflation

Yuan

et al. 2023

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“…Xiao et al (2021) found that the ETS can significantly improve TFP, and firm's operating channel and the profitability capacity channel are investigated. Zhang Y. et al (2022) showed that the ETS significantly improves the green development efficiency and regional carbon equality. Yu et al (2021) found that the ETS has accelerated both the depth and breadth of outward direct investment from China.…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of the carbon emission trading scheme on a firm’s total factor productivity: An analysis of corporate green innovation and resource allocation efficiency

Wang

Yang

Zhang

2022

This study investigates the effect of the carbon emission trading scheme on a firm’s total factor productivity in China. With a sample from 2008 to 2019, applying the time-varying DID method, our empirical results reveal that the carbon emission trading scheme significantly improves a firm’s total factor productivity, which provides evidence for Porter’s hypothesis. Moreover, there are two channels through which the total factor productivity is impacted: the corporate green innovation channel and the resource allocation efficiency channel. Furthermore, the impact of the carbon emission trading scheme is more pronounced for private firms, and firms in the provinces with higher institutional development, lower environmental quality, and greater law enforcement of environmental protection tend to have larger total factor productivity. Our models survive numerous robustness checks.

“…Benz et al (2021) show that different types of investors have different preference for carbon intensive investments. Zhang et al (2021) show that investor sentiment contains excellent explanatory information for forecasting carbon price. In general, the existing research shows that companies and investors will largely affect price fluctuations.…”

Section: Introductionmentioning

confidence: 99%

Forecasting the volatility of European Union allowance futures with time-varying higher moments and time-varying risk aversion

Mei

Ding

2022

There is increasing evidence that European Union allowance (EUA) futures return distributions exhibit features of time-varying higher moments (skewness and kurtosis), which plays an important role in modeling and forecasting EUA futures volatility. Moreover, a number of studies have shown that time-varying risk aversion (RA) contains useful information for forecasting EUA futures volatility. In light of this, this paper proposes the GARCH-MIDAS with skewness and kurtosis (hereafter GARCH-MIDAS-SK) to empirically investigate the impact and predictive role of RA on EUA futures volatility. Our empirical results show that RA has a significantly negative impact on the long-term volatility of EUA futures. The EUA futures return distributions exhibit obvious features of time-varying higher moments. Incorporating RA and time-varying higher moments improves the in-sample fitting of the model. Furthermore, out-of-sample results suggest that incorporating RA and time-varying higher moments leads to significantly more accurate volatility forecasts. This finding is robust to alternative out-of-sample forecasting windows.