How to improve the market efficiency of carbon trading: A perspective of China

Emissions trading scheme (ETS) is one of the effective measures to realize energy conservation and emission reduction. In order to set up a nationwide carbon emissions trading mechanism, seven ETS pilots have been launched in China. Firstly, based on empirical investigation and research of seven pilots, this paper analyzed the market efficiency of ETS pilots from four aspects: carbon price, trading volume, market liquidity, and information transparency. The result showed that the market efficiency of ETS pilots is not satisfactory in spite of the fact that system designs of ETS have achieved preliminary result. Then, the reason for low market efficiency of ETS pilots was discussed from some factors such as institutional arrangements, market participants, the supply and demand, etc. Finally, this paper puts forward some policy suggestions to improve the market efficiency of China׳s carbon trading market.