Abstract:With the worsening of global climate change, establishment of carbon trading scheme has become an important option for governments to address the issue of climate change. As newly created market, carbon market is easily subject to the shocks from institution modification, rule adjustment, and vital information announcement. The research establishes an event study method through modeling bilaterally modified dummy variables in AR-GARCH model to unveil the ex ante and ex post impact process and impact pattern of the announcement event. The study takes National Allocation Plans (NAP) announcement and Verified Emission Announcement (VEA) event in the European Union emission trading scheme (EU ETS) as examples. Empirical results show that bilaterally modified dummy variables can efficiently capture the ex ante and ex post impact process of announcement event on expected carbon returns and volatility. The announcement of NAP I has significant positive impact on carbon returns, and has no significant impact on carbon price volatility. The announcement of VEA I has significant negative ex post impact on carbon returns and the announcement of VEA Ⅱ has significant positive ex ante and ex post impact on carbon returns. In addition, the announcements of VEA I and VEA Ⅱ have no significant impact on carbon price volatility. Compared with the impact of VEA I announcement, the impact of VEA Ⅱ announcement has decreased, mainly due to the fact that the verified emission of the first phase provides reliable data to calibrate expectations.