Network Features of the EU Carbon Trade System: An Evolutionary Perspective

In this paper, a network model is constructed using real trading data from the EU carbon market. Metric indicators are then introduced to measure the network, and the economic meanings of the indicators are discussed. By integrating time windows with the network model, three types of network features are examined: growth features, structural features, and scale-free features. The growth pattern of the carbon trading network is then analyzed. As the market grow, the geodesic distances become shorter and the clustering coefficients become larger. The trends of these two indicators suggest that the market is evolving towards efficiency; however, their tiny changes are insufficient to have significant impact. By modeling the heterogeneity of the carbon trading network, we find that the trading relationships between firms obey a broken power law model, which consists of two power law models. The broken power law model can be approximately defined as a traditional power law but with a longer tail in distribution. Furthermore, we find that the model is valid for most of the time of both phases, the model only invalid when the market approaches a high growth rate.