An Empirical Investigation of Price bubbles in China's Carbon Trading System Using LPPLS and GSADF test

The stability of carbon prices is a fundamental support for the healthy operation of the carbon market. This study aims to identify and analyze the price bubbles in eight pilot carbon markets and the national carbon market in China using the GSADF and LPPLS models. We found that except for the carbon markets in Fujian and Shenzhen, price bubbles exist in the remaining six pilot carbon markets and the national carbon market during the sample period. The duration of bubbles in various Chinese carbon markets is generally short, and there is weak interconnection between the pilot markets. The presence of bubbles is influenced by factors such as carbon market policy mechanisms, macroeconomic conditions, and market volatility.