Recognition and analysis of potential risks in China's carbon emission trading markets

China formally launched the carbon trading pilots in seven provinces and cities in 2013. Based on the operating situations of international carbon emission trading markets and that in China, this study compares and analyzes the potential risks in the European Union Emission Trading Scheme, California's cap-and-trade system, and the seven regional carbon trading pilots in China. It mainly recognizes market operation risks, risks of uncertain policy expectation, and risks of uncertain mechanism designs existing in China's carbon trading pilots. The carbon market risks are not good for the formation of rational price signals, making it difficult to guide enterprises on how to make low-carbon technology investments. Such risks also affect the effectiveness and functions of carbon markets, which can lead to the non-achievement of national emission reduction goals. China has launched the national carbon emission trading scheme on December 19, 2017. While building the national carbon trading scheme, it is important to fully refer to the experiences of international carbon markets and China's carbon trading pilots apart from strengthening the recognition, control, and supervision of carbon market risks. Doing so can promote the healthy development of China's national carbon trading scheme. Keywords: Carbon trading pilots, Market operation risks, Uncertain policy expectation risks, Uncertain mechanism design risk