Time series analysis uncovers limited machine learning price predictability in China's expanded emissions trading system, indicating weak-form market efficiency.
China’s national Emissions Trading System expanded from power to steel, cement and aluminum in March 2025. We examine daily carbon emission allowance price predictability using 1203 trading-day prices. Eleven models and a 26-predictor baseline undergo nested expanding-window validation. Separate common-sample sensitivities add pre-open GFS weather, an official ten-day coal price, a conservatively lagged national generation proxy and official macroeconomic first releases. Across 952 forecasts, the random walk has the lowest RMSE (1.242 CNY/t); the stabilized neural network reaches 1.251. The exact-release/first-public macro specification lowers random-forest RMSE from 1.289 to 1.266, whereas the public energy/weather specification records 1.275; neither beats the benchmark. Technical variables retain the largest model attribution, but even a technical-only forest records 1.253. Ljung–Box and BDS tests detect dependence, while sign runs do not reject sign independence and the variance-ratio null is rejected only at the two-day horizon. Rolling and multiple-break tests find no expansion-date shift. Volatility rankings remain loss-dependent. Statistical dependence therefore exists without stable point-forecast gains. The added energy measures do not represent observed national daily load, and execution returns are not inferred from daily OHLC data.
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Li et al. (2026) studied this question.
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