Dynamic Interactions Among the Carbon Market, Commodity Market, and Climate Policy Uncertainty: A Wavelet-based Analysis

DOI

10.2991/978-94-6239-701-9_37How to use a DOI?

Keywords

Carbon market; Commodity market; CPU; Wavelet coherence

Abstract

This study examines how China’s carbon market, commodity market, and climate policy uncertainty interact with each other, particularly in the context of the country’s dual-carbon objectives. Using continuous wavelet transform (CWT) and wavelet coherence (WC) methods on data from January 2016 through August 2024, the analysis picks out volatility patterns and cross-market linkages that operate at different time scales. The results indicate that carbon price movements tend to cluster in shorter time frames and are heavily influenced by policy changes, while commodity market volatility follows longer cycles driven by broader macroeconomic trends and geopolitical events. A robust long-run positive comovement emerges between the carbon and commodity markets—with commodity prices consistently leading—while a sustained negative association characterizes the carbon market’s long-term relationship with climate policy uncertainty. Around 2023, however, this linkage turns positive over short horizons. These findings highlight why regulatory clarity and coordination across markets matter for keeping extreme price swings in check. The paper suggests improving policy transparency and setting up real-time information sharing to help carbon prices better reflect underlying fundamentals and reduce lags in responding to policy signals. By mapping out these shifting cross-market dependencies over time, the research offers practical guidance for designing more effective carbon markets amid ongoing economic transformation.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Zixuan Zhang
PY  - 2026
DA  - 2026/07/30
TI  - Dynamic Interactions Among the Carbon Market, Commodity Market, and Climate Policy Uncertainty: A Wavelet-based Analysis
BT  - Proceedings of the 2026 11th International Conference on Social Sciences and Economic Development (ICSSED 2026)
PB  - Atlantis Press
SP  - 351
EP  - 363
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-701-9_37
DO  - 10.2991/978-94-6239-701-9_37
ID  - Zhang2026
ER  -