Energy and regional factors drive carbon price volatility in China’s emissions trading markets

Shanghai Jiao Tong University Journal Center

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Background and Motivation

China’s national carbon market has grown rapidly in recent years, emerging as one of the world’s largest Emissions Trading Systems (ETS). Carbon price volatility not only affects market stability and pricing credibility but also influences corporate investment and emissions strategies. While prior research has identified various factors affecting carbon price fluctuations, most studies focus on a narrow set of variables and rarely compare broader potential drivers across regions. This leaves a gap in understanding which factors are truly critical in explaining volatility dynamics in China’s ETS markets, especially given the frequency mismatch between daily carbon prices and monthly or quarterly macroeconomic indicators.

 

Methodology and Scope

To address these challenges, researchers from the University of Science and Technology of China and Southwest University of Science and Technology developed an integrated GARCH-MIDAS-Adaptive-Lasso (GM-AL) model. This framework combines the ability to handle mixed-frequency data with advanced variable selection techniques, enabling the identification of the most influential predictors from a large set of macroeconomic, financial, energy, and environmental variables. The study focuses on three major regional ETS pilots in China: Hubei, Guangdong, and Shenzhen, using daily carbon price data from 2014 to 2023. A structured pool of low-frequency variables—including energy prices, financial indices, policy uncertainty indicators, and environmental factors—was analysed to uncover region-specific drivers of carbon price volatility.

 

Key Findings and Contributions

The study reveals clear regional differences in what drives carbon price volatility:

• In Hubei, the electricity and energy sectors (measured by the CSI 300 Electricity and Energy Indices) are the primary drivers.
• In Guangdong and Shenzhen, crude oil prices and the energy index play a more dominant role.
• Overall, energy-related factors exert the strongest influence on China’s carbon market volatility, while policy and environmental variables show limited impact.

The proposed GM-AL model significantly outperforms benchmark models in both forecast accuracy and economic value. It also demonstrates robustness across different weighting schemes and alternative dimensionality reduction methods. The research contributes to the literature by systematically integrating multidimensional factors into volatility modelling and providing a scalable framework for other developing countries seeking to establish or enhance their own ETS mechanisms.

 

Why It Matters

Understanding the drivers of carbon price volatility is crucial for policymakers, regulators, and market participants. The findings highlight the importance of energy market signals and regional industrial structures in shaping carbon price dynamics. By identifying key predictors, this research supports the development of early warning systems and more responsive regulatory frameworks. It also offers investors improved tools for risk management and decision-making in carbon markets.

 

Practical Applications

The GM-AL model can be used by:

• Regulators to design differentiated, region-specific policies and stabilise carbon markets through proactive monitoring.
• Investors and financial institutions need to enhance volatility forecasting, optimise portfolio strategies, and assess carbon market risks.
• Energy and industrial firms need to anticipate better compliance costs and adjust emissions strategies.
• International researchers and policymakers in other emerging economies can use it as a reference for building robust carbon pricing systems.

 

Discover high-quality academic insights in finance from this article published in China Finance Review International. Click the DOI below to read the full-text!

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Journal

China Finance Review International

DOI

10.1108/CFRI-03-2025-0088 

Method of Research

News article

Article Title

Which factors drive China's carbon price volatility? Evidence from GARCH-MIDAS-Adaptive-Lasso model

 

Flaring black hole whips up ultra-fast winds

European Space Agency

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image: 

An international team of researchers used the European Space Agency's XMM-Newton and XRISM, a JAXA-led mission with ESA participation, to uncover and study a never-seen-before blast from a supermassive black hole. The gravitational monster whipped up powerful winds, flinging material out into space at eye-watering speeds of 60 000 km per second.

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Credit: European Space Agency (ESA)

Leading X-ray space telescopes XMM-Newton and XRISM have spotted a never-seen-before blast from a supermassive black hole. In a matter of hours, the gravitational monster whipped up powerful winds, flinging material out into space at eye-watering speeds of
60 000 km per second.

The gigantic black hole lurks within NGC 3783, a beautiful spiral galaxy imaged recently by the NASA/ESA Hubble Space Telescope. Astronomers spotted a bright X-ray flare erupt from the black hole before swiftly fading away. As it faded, fast winds emerged, raging at one-fifth of the speed of light.

“We’ve not watched a black hole create winds this speedily before,” says lead researcher Liyi Gu at Space Research Organisation Netherlands (SRON). “For the first time, we’ve seen how a rapid burst of X-ray light from a black hole immediately triggers ultra-fast winds, with these winds forming in just a single day.”

Devouring material

To study NGC 3783 and its black hole, Gu and colleagues simultaneously used the European Space Agency’s XMM-Newton and the X-Ray Imaging and Spectroscopy Mission (XRISM), a JAXA-led mission with ESA and NASA participation.

The black hole in question is as massive as 30 million Suns. As it feasts on nearby material, it powers an extremely bright and active region at the heart of the spiral galaxy. This region, known as an Active Galactic Nucleus (AGN), blazes in all kinds of light, and throws powerful jets and winds out into the cosmos.

“AGNs are really fascinating and intense regions, and key targets for both XMM-Newton and XRISM,” adds Matteo Guainazzi, ESA XRISM Project Scientist and co-author of the discovery.

“The winds around this black hole seem to have been created as the AGN’s tangled magnetic field suddenly ‘untwisted’ – similar to the flares that erupt from the Sun, but on a scale almost too big to imagine.”

A little less alien

The winds from the black hole resemble large solar eruptions of material known as coronal mass ejections, which form as the Sun hurls streams of superheated material into space. In this way, the study shows that supermassive black holes sometimes act like our own star, making these mysterious objects seem a little less alien.

In fact, a coronal mass ejection following an intense flare was spotted at the Sun as recently as 11 November, with the winds associated with this event thrown out at initial speeds of 1500 km per second.

“Windy AGNs also play a big role in how their host galaxies evolve over time, and how they form new stars,” adds Camille Diez, a team member and ESA Research Fellow.

“Because they’re so influential, knowing more about the magnetism of AGNs, and how they whip up winds such as these, is key to understanding the history of galaxies throughout the Universe.”

A joint discovery

XMM-Newton has been a pioneering explorer of the hot and extreme Universe for over 25 years, while XRISM has been working to answer key open questions about how matter and energy move through the cosmos since it launched in September 2023.

The two X-ray space telescopes worked together to uncover this unique event and understand the black hole’s flare and winds. XMM-Newton tracked the evolution of the initial flare with its Optical Monitor, and assessed the extent of the winds using its European Photon Imaging Camera (EPIC). XRISM spotted the flare and winds using its Resolve instrument, also studying the winds’ speed, structure, and figuring out how they were launched into space.

“Their discovery stems from successful collaboration, something that’s a core part of all ESA missions,” says ESA XMM-Newton Project Scientist Erik Kuulkers.

“By zeroing in on an active supermassive black hole, the two telescopes have found something we’ve not seen before: rapid, ultra-fast, flare-triggered winds reminiscent of those that form at the Sun. Excitingly, this suggests that solar and high-energy physics may work in surprisingly familiar ways throughout the Universe.”

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Journal

Astronomy and Astrophysics

DOI

10.1051/0004-6361/202557189 

Method of Research

Observational study

Subject of Research

Not applicable

Article Title

Delving into the depths of NGC 3783 with XRISM III. Birth of an ultrafast outflow during a soft flare

Article Publication Date

9-Dec-2025

Pompeii offers insights into ancient Roman building technology

MIT researchers analyzed a recently discovered ancient construction site to shed new light on a material that has endured for thousands of years.

Massachusetts Institute of Technology

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An ancient Pompeii wall at a newly excavated site, where Associate Professor Admir Masic applied compositional analysis (overlayed to right) to understand how ancient Romans made concrete that has endured for thousands of years.
 

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Credit: Archaeological Park of Pompeii

Concrete was the foundation of the ancient Roman empire. It enabled Rome’s storied architectural revolution as well as the construction of buildings, bridges, and aqueducts, many of which are still used some 2,000 years after their creation.

In 2023, MIT Associate Professor Admir Masic and his collaborators published a paper describing the manufacturing process that gave Roman concrete its longevity: Lime fragments were mixed with volcanic ash and other dry ingredients before the addition of water. Once water is added to this dry mix, heat is produced. As the concrete sets, this “hot-mixing” process traps and preserves the highly reactive lime as small, white, gravel-like features. When cracks form in the concrete, the lime clasts redissolve and fill the cracks, giving the concrete self-healing properties.

There was only one problem: The process Masic’s team described was different from the one described by the famed ancient Roman architect Vitruvius. Vitruvius literally wrote the book on ancient architecture. His highly influential work, “De architectura,” written in the 1st century B.C.E., is the first known book on architectural theory. In it, Vitruvius says that Romans added water to lime to create a paste-like material before mixing it with other ingredients.

“Having a lot of respect for Vitruvius, it was difficult to suggest that his description may be inaccurate,” Masic says. “The writings of Vitruvius played a critical role in stimulating my interest in ancient Roman architecture, and the results from my research contradicted these important historical texts.”

Now, Masic and his collaborators have confirmed that hot-mixing was indeed used by the Romans, a conclusion he reached by studying a newly discovered ancient construction site in Pompeii that was exquisitely preserved by the volcanic eruption of Mount Vesuvius in the year 79 C.E. They also characterized the volcanic ash material the Romans mixed with the lime, finding a surprisingly diverse array of reactive minerals that further added to the concrete’s ability to repair itself many years after these monumental structures were built.

“There is the historic importance of this material, and then there is the scientific and technological importance of understanding it,” Masic explains. “This material can heal itself over thousands of years, it is reactive, and it is highly dynamic. It has survived earthquakes and volcanoes. It has endured under the sea and survived degradation from the elements. We don’t want to completely copy Roman concrete today. We just want to translate a few sentences from this book of knowledge into our modern construction practices.”

The findings are described in a forthcoming paper in Nature Communications. Joining Masic on the paper are first authors Ellie Vaserman ’25 and Principal Research Scientist James Weaver, along with Associate Professor Kristin Bergmann, PhD candidate Claire Hayhow, and six other Italian collaborators.

Uncovering ancient secrets

Masic has spent close to a decade studying the chemical composition of the concrete that allowed Rome’s famous structures to endure for so much longer than their modern counterparts. His 2023 paper analyzed the material’s chemical composition to deduce how it was made.

That paper used samples from a city wall in Priverno in southwest Italy, which was conquered by the Romans in the 4th century B.C.E. But there was a question as to whether this wall was representative of other concrete structures built throughout the Roman empire.

The recent discovery by archaeologists of an active ancient construction site in Pompeii (complete with raw material piles and tools) therefore offered an unprecedented opportunity.

For the study, the researchers analyzed samples from these pre-mixed dry material piles, a wall that was in the process of being built, completed buttress and structural walls, and mortar repairs in an existing wall.

“We were blessed to be able to open this time capsule of a construction site and find piles of material ready to be used for the wall,” Masic says. “With this paper, we wanted to clearly define a technology and associate it with the Roman period in the year 79 C.E.”

The site offered the clearest evidence yet that the Romans used hot-mixing in concrete production. Not only did the concrete samples contain the lime clasts described in Masic’s previous paper, but the team also discovered intact quicklime fragments pre-mixed with other ingredients in a dry raw material pile, a critical first step in the preparation of hot-mixed concrete.

Bergman, an associate professor of earth and planetary sciences, helped develop tools for differentiating the materials at the site.

“Through these stable isotope studies, we could follow these critical carbonation reactions over time, allowing us to distinguish hot-mixed lime from the slaked lime originally described by Vitruvius,” Masic says. “These results revealed that the Romans prepared their binding material by taking calcined limestone (quicklime), grinding them to a certain size, mixing it dry with volcanic ash, and then eventually adding water to create a cementing matrix.”

The researchers also analyzed the volcanic ingredients in the cement, including a type of volcanic ash called pumice. They found that the pumice particles chemically reacted with the surrounding pore solution over time, creating new mineral deposits that further strengthened the concrete.

Rewriting history

Masic says the archaeologists listed as co-authors on the paper were indispensable to the study. When Masic first entered the Pompeii site, as he inspected the perfectly preserved work area, tears came to his eyes.

“I expected to see Roman workers walking between the piles with their tools,” Masic says. “It was so vivid, you felt like you were transported in time. So yes, I got emotional looking at a pile of dirt. The archaeologists made some jokes.”

Masic notes that calcium is a key component in both ancient and modern concretes, so understanding how it reacts over time holds lessons for understanding dynamic processes in modern cement as well. Towards these efforts, Masic has also started a company, DMAT, that uses lessons from ancient Roman concrete to create long-lasting modern concretes.

“This is relevant because Roman cement is durable, it heals itself, and it’s a dynamic system,” Masic says. “The way these pores in volcanic ingredients can be filled through recrystallization is a dream process we want to translate into our modern materials. We want materials that regenerate themselves.”

As for Vitruvius, Masic guesses that he may have been misinterpreted. He points out that Vitruvius also mentions latent heat during the cement mixing process, which could suggest hot-mixing after all.

The work was supported, in part, by the MIT Research Support Committee (RSC) and the MIT Concrete Sustainability Hub.

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Written by Zach Winn, MIT News

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Journal

Nature Communications

DOI

10.1038/s41467-025-66634-7 

Article Title

"An unfinished Pompeian construction site reveals ancient Roman building technology"