Price dynamics in China’s national carbon market and their interactions with Shanxi electricity spot market and northern energy hubs

As China advances its national carbon emissions trading scheme (ETS) alongside reforming its power sector, understanding the price-transmission channels among these markets is vital for effective decarbonization. Utilizing daily data from July 2021 to December 2025, this study examines price interactions among China’s national carbon market, electricity prices in the pioneering Shanxi spot market, and regional fossil-fuel prices. Methodologically, it employs an event-study design with a vector error correction model and multivariate regression models. The event study reveals that regulatory announcements are associated with notable event-related price fluctuations in the carbon market. The econometric results confirm a long-run cointegration between carbon and thermal coal prices, reflecting structural energy-to-carbon price linkages. While prices in the electricity spot market remain strongly driven by underlying daily coal and natural gas costs, they display no statistically significant association with daily carbon-price fluctuations, indicating that under the current framework of fully free allowance allocation, carbon costs are yet to noticeably permeate spot-market bidding behavior. These findings demonstrate that deeper power-sector liberalization and technology-neutral carbon benchmarking are needed to unlock effective carbon-to-electricity cost pass-through in China.