A non-parametric analysis of the driving factors of China's carbon prices

Highlights: • Coal prices have an inverted U-shaped nonlinear impact on carbon prices. • Clean energy prices have a positive U-shaped impact on carbon prices. • Fuel oil prices have an M-shaped nonlinear effect on carbon prices. Carbon prices have gradually become the principal policy for controlling carbon dioxide emissions, which has attracted the attention of countries worldwide. The price factor is significantly affected by the market economy and often exhibits non-linear characteristics. This article aims to investigate the possible non-linear relationship between carbon prices and their influencing factors using a data-driven non-parametric additive regression model. Estimated results show that coal prices have an inverted U-shaped non-linear impact on carbon prices. It means that coal prices pushed up carbon prices; in the long run, the changes in coal prices will help reduce carbon prices. The real economy also exerts an inverted U-shaped effect on carbon prices, which is the main reason for the rapid expansion of energy-intensive industries in the short run. The impact of natural gas prices presents a gentle inverted U-shaped pattern, owing to the periodic changes in natural gas consumption. On the contrary, renewable energy prices have a "lower first, then increase" U-shaped impact on carbon prices. Therefore, the government should formulate differentiated policies at different time stages.