Impacts of Fossil Fuel Price Fluctuations on Carbon Emission Trading Prices in China

Abstract

This study comprehensively reviews multiple research regarding the impact of fossil fuel price fluctuations on carbon emission trading prices. Presently, coal is the largest energy source in China and the largest contributor to carbon emissions. However, as the green economy develops and the global landscape changes, requirements for carbon emissions grow stricter. The manufacturing industry in China is booming while enterprises related to the carbon market are facing immense pressure to reduce emissions under the mechanism of carbon pricing and trading. Fossil fuel use is the largest source of carbon emissions in China. Therefore, carbon trading mechanisms and carbon tax policies are key cost factors for the enterprises involved. This study aims to discuss the impact of fossil fuel price fluctuations on carbon emission trading prices in China, draw relevant conclusions, and propose corresponding suggestions. From the government's perspective, they can establish a dynamic adjustment mechanism for carbon emission trading prices. Meanwhile, enterprises should establish a mechanism to forecast carbon emission trading prices, enabling them to comprehensively manage the impact of price fluctuations driven by changes in fossil fuel prices.