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The Growth of Carbon Markets in Asia: The Potential Challenges for Future Development

Publication | August 2019
The Growth of Carbon Markets in Asia: The Potential Challenges for Future Development

Asia is one of the fastest-growing regions of the world but is also responsible for a major share of global emissions.

We provide comprehensive details on the carbon markets across the major Asian economies and with specific attention to the Chinese carbon market. We discuss in particular the carbon markets across the major northeast (People’s Republic of China [PRC], Japan, and Republic of Korea) Asian economies. Further, we empirically explore the interrelationship between the Shanghai and Shenzhen carbon emission markets, using an autoregressive distributed lag model with daily high-frequency data from 3 January 2017 to 9 October 2018. The evidence from the analysis confirms unidirectional influence from the Shanghai carbon emission market on the Shenzhen carbon emission market. Our findings shed light on the carbon emission markets’ policy formulation for the Chinese government to achieve sustainable economic growth and meet carbon reduction targets in the PRC. Finally, we provide numerous policy and practical implications for the Asian economies with respect to the issues of climate change policies.

WORKING PAPER NO: 987