Are there spillovers among China's pilots for carbon emission allowances trading?

As the process of carbon reduction continues, carbon trading market in China is becoming mature and moving from fragmented pilots to a national unity. This study aims to examine whether there are return and volatility spillovers among China's carbon emissions trading pilots, by using a generalized forecast error variance decomposition as well as a spectral decomposition in VAR process. Empirical results show that there are return and volatility spillovers among China's carbon emissions trading pilots. But all of them are relatively low, with each pilot contributing or receiving no more than 1.5% of impacts in return spillover, and no more than 7% in volatility spillover, which means that the dynamics of price in each pilot are mainly driven by its own factors. However, some characteristics of spillover effect are still worth exploring. The spillover effect presents an approximate "M" shaped fluctuation trend during the period from pre- to post-compliance. In terms of frequency decompositions, return spillover is dominated by short-term effects, while volatility spillover is dominated by long-term effects. Some policy implications are also provided along with these research conclusions.