The paper "Integration of the International Carbon Market: A Time-varying Analysis" by Chenyan Lyu and Bert Scholtens examines the connectedness among key carbon markets—European Union (EU), New Zealand (NZ), California (CA), and Hubei (China)—using a Time-Varying Parameter Vector Autoregressive (TVP-VAR) model. The study spans from April 2014 to December 2021, focusing on the dynamics of carbon price interactions and their drivers. The TVP-VAR model is novel in its application to global carbon market research, combining it with a connectedness approach to overcome the limitations of fixed parameter estimation. Key findings include: - The total connectedness index (TCI) for carbon price returns and volatility is relatively low, at 10-12%, suggesting limited spillover effects. - Dynamic spillover patterns are evident, particularly during the energy crisis and Covid-19 outbreak. - The EU ETS consistently acts as a net transmitter of returns, while the NZ ETS is a major shock receiver in both return and volatility systems. - Global climate negotiations and carbon market events have a minor impact on connectedness compared to energy or financial crises and the Covid-19 outbreak. - The study highlights the importance of understanding carbon price volatility and market transmissions for investors and policymakers. The research contributes to both academic and practical dimensions of emission trading, providing valuable insights into market linkages and efficiency. The findings also offer practical implications for investors interested in periods with significant carbon price volatility and transmission effects across different carbon markets.The paper "Integration of the International Carbon Market: A Time-varying Analysis" by Chenyan Lyu and Bert Scholtens examines the connectedness among key carbon markets—European Union (EU), New Zealand (NZ), California (CA), and Hubei (China)—using a Time-Varying Parameter Vector Autoregressive (TVP-VAR) model. The study spans from April 2014 to December 2021, focusing on the dynamics of carbon price interactions and their drivers. The TVP-VAR model is novel in its application to global carbon market research, combining it with a connectedness approach to overcome the limitations of fixed parameter estimation. Key findings include: - The total connectedness index (TCI) for carbon price returns and volatility is relatively low, at 10-12%, suggesting limited spillover effects. - Dynamic spillover patterns are evident, particularly during the energy crisis and Covid-19 outbreak. - The EU ETS consistently acts as a net transmitter of returns, while the NZ ETS is a major shock receiver in both return and volatility systems. - Global climate negotiations and carbon market events have a minor impact on connectedness compared to energy or financial crises and the Covid-19 outbreak. - The study highlights the importance of understanding carbon price volatility and market transmissions for investors and policymakers. The research contributes to both academic and practical dimensions of emission trading, providing valuable insights into market linkages and efficiency. The findings also offer practical implications for investors interested in periods with significant carbon price volatility and transmission effects across different carbon markets.