Conference Agenda

To mitigate carbon emissions, policymakers increasingly deploy hybrid systems combining emissions trading schemes (ETS) with offset mechanisms—two complementary market instruments formally characterized as "dual-track carbon pricing". The fungibility between allowances and offsets enables compliance substitution, creating dynamic price interdependencies governed by no-arbitrage principles. This study develops a stochastic pricing model integrating asset pricing theory with abatement dynamics to examine how adjusting offset import limits affects market equilibrium. Our simulations demonstrate that expanding the import limit depresses allowance prices through dual channels: (1) direct demand reduction and (2) delayed abatement investment cycles. These interactions generate feedback effects where offset prices respond to allowance price fluctuations and expanded market participation. With China's Chinese Certified Emission Reduction (CCER) market relaunch, our conclusions are of great importance for China's carbon market policy. Given the differential impacts on the prices of these two carbon assets, the offset import limit can be adjusted based on market expectations to influence the price and spread of carbon assets, thereby ensuring that the advantages of CCER are used without adversely affecting the allowance price.