Impacts of climate change risk and economic policy uncertainty on carbon prices: Configuration analysis from a complex system perspective

Despite a vast amount of research examining the antecedent variables of carbon prices, the impact of climate change risk on carbon prices has been rarely explored. This study adopted a complex system perspective and applied NCA and fsQCA models to analyze regional climate physical risk (CPR) and climate transition risk (CTR) from a complex system perspective. The results suggested that the primary factors affecting the Hubei carbon price included coal prices, market regulation, and national carbon market prices, and carbon prices could be higher in response to higher levels of economic policy uncertainty (EPU) combined with other factors. By comparing the changes of independent variables before and after the opening of the national carbon market, it was found that lower CPR and CTR were conducive to higher carbon prices; the former has received early attention but the latter has been neglected. The findings from this study provided theoretical and practical insight to inform government regulation of carbon prices and decision-making for carbon market stakeholders. The government should pay attention to the impacts of climate change risks and EPU on carbon prices because these factors could significantly undermine the incentive and economic effectiveness of the carbon market.