Price dynamics and forecasting of China's Tradable green Certificates: An analysis of linkages with the carbon emissions trading market

Against the backdrop of China's “dual carbon” goals, the Tradable Green Certificate (TGC) market and the Carbon Emissions Trading (CET) market are vital for promoting a cleaner energy structure. Understanding their price interactions is crucial for effective policy design. This study first develops a market equilibrium model that accounts for differences in supply and demand elasticities to examine the relationship between TGC and CET prices, followed by an empirical analysis using a bivariate DCC-GARCH(1,1) model. Furthermore, the research employs machine learning techniques (Random Forest and XGBoost) alongside the ARIMA model to forecast TGC prices, and utilizes the Diebold-Yilmaz spillover index to analyze risk spillover effects between the TGC market and other related markets. The findings reveal: (1) A weak negative correlation (average of −0.061) exists between TGC and CET prices, with analysis suggesting rising CET prices impact TGC supply-demand dynamics and can lead to lower TGC prices under certain elasticity conditions. (2) Machine learning models outperform the ARIMA model in capturing the dynamic fluctuations and forecasting TGC prices. (3) TGC prices are notably influenced by energy markets and international financial markets. (4) The TGC market is a net risk recipient (net spillover effect of −0.100).