The Dynamic Relationship between China’s Carbon Emission Trading Market and Chinese Stock Market Sectors

Abstract This study aims to explore the dynamic relationship and transmission mechanism between China's carbon emission trading market (CEA) and key industry sectors, focusing specifically on analyzing the information spillover effects of the carbon market and the asymmetric impacts across sectors under varying market conditions. Using daily data from 2021 to 2023, the methodology employs quantile Granger causality tests and dynamic connectedness measures, to conduct comprehensive empirical research. The findings reveal that the CEA primarily functions as an information receiver rather than transmitter, with the intensity of its impact exhibiting significant asymmetry across different market states. In normal market conditions, the overall connectedness index stands at 89.41, maintaining similarly high levels during both market upturns (90.21) and downturns (90.45). From an industry perspective, traditional high-energy-consuming sectors such as utilities and energy maintain stable and significant causal relationships with the CEA, while low-carbon industries like healthcare demonstrate notably weaker associations. These findings not only highlight the close connection between the carbon market and the real economy but also reflect the underdeveloped nature of China's carbon market price discovery mechanism. The research contributes important empirical evidence for improving the design of carbon market systems and enhancing investment decision-making in the context of China's carbon neutrality goals.