Carbon trading markets play an important role in emissions mitigation through financial tools. China has established seven carbon trading pilots in its major cities and provinces. This paper explores the evolution laws of the co-movement of daily prices between carbon markets using complex network theory. First, we combine the co-movement of prices in five continuous days to co-movement modes. Then, we construct a directed weighted complex network. The nodes are the co-movement modes. Edges are defined as the time adjacent relations of two nodes. The frequency of an edge is taken as its weight. Transaction prices for the pilots in Hubei and Shanghai are selected as the samples. Results show an appearance of 231 modes from the 243 possible patterns, indicating a scattering of co-movement modes. Among all modes, the most frequent one is the fully stable one, showing that the markets are inactive in most time. Compared to the full sample and other periods, the complex networks in the first sample period stands out due to its large nodes and the existence of rings. This finding indicates the exact mirroring of some successive co-movement modes. The method proposed in this paper helps in understanding the evolution of Intermarket co-movement.
Keywords carbon price, carbon market, co-movement mode, complex network