Reasonable initial price interval calculation of carbon market

: Currently there is a disconnection between carbon price and market supply-and-demand in China ’ s carbon pilot market and the carbon pricing system has failed to meet the development needs of carbon markets. To address this problem, this study used the stochastic analysis method to measure carbon cost from the perspective of firms, and developed a determinant equation that affects corporate carbon costs based on the decoupling theory. Using this equation, we simulated the linkages between firm- government- market and initial carbon price, thereby obtaining the fluctuation interval of such price that conforms to the pattern of China ’ s carbon market development. Through empirical tests, we obtained the following results. (1) Government ’ s penalty cost and the probability of quota shortage both are key factors that restrict emission control firms to obtain carbon trading income, and a premise to ensure the sound development of carbon market is to balance the relation among firms, the government, and the market. (2) The setting of initial carbon price is directly related to the emission reduction efficiency that is expected by the government in the carbon market, and in the current economic environment, the reasonable setting range of initial carbon price in the national unified market is [41, 52] Yuan/t. (3) Penalty cost explains 97% of the setting of initial carbon price, and penalty mechanism is the best tool that can lead to the sound development of carbon markets at the government level currently. (4) Both market efficiency and emission reduction goal are main indicators that affect carbon price setting in the long run, and one important premise for the sound development of carbon market is to set up a two- way initial price system of “ market- government. ” This article provides theoretical underpinnings as well as empirical support for enriching China ’ s carbon market price theory and setting the initial carbon price scientifically.