European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007)
AbstractThe price of European Union Allowances (EUAs) has been declining at far lower levels than expected during Phase I (2005-2007). Previous literature identifies among its main explanations over-allocation concerns, early abatement efforts in 2005, and possibly decreasing abatement costs in 2006. We advocate low allowance prices may also be explained by banking restrictions between 2007 and 2008. Based on a Hotelling-CAPM analysis, we provide statistical evidence that the French and Polish decisions to ban banking contribute to the explanation of low EUA Phase I prices. Besides, we provide the first rigorous empirical verification that the cost-of-carry relationship between EUA spot and futures prices for delivery during Phase II does not hold after the enforcement of the inter-period banking restrictions. This situation may be interpreted as a sacrifice of the temporal flexibility offered to industrials in Phase I to correct design inefficiencies, and achieve an efficient price pattern in Phase II.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by International Association for Energy Economics in its journal The Energy Journal.
Volume (Year): Volume 30 (2009)
Issue (Month): Number 3 ()
Other versions of this item:
- Emilie Alberola & Julien Pierre Chevallier, 2007. "European carbon prices and banking restrictions: evidence from phase I (2005-2007)," EconomiX Working Papers 2007-32, University of Paris West - Nanterre la Défense, EconomiX.
- F0 - International Economics - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kling, Catherine L. & Rubin, Jonathan, 1997.
"Bankable Permits for the Control of Environmental Pollution,"
Staff General Research Papers
1479, Iowa State University, Department of Economics.
- Kling, Catherine & Rubin, Jonathan, 1997. "Bankable permits for the control of environmental pollution," Journal of Public Economics, Elsevier, vol. 64(1), pages 101-115, April.
- Cason, Timothy N. & Gangadharan, Lata, 2006.
"Emissions variability in tradable permit markets with imperfect enforcement and banking,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 61(2), pages 199-216, October.
- Timothy N. Cason & Lata Gangadharan, 2004. "Emissions Variability in Tradable Permit Markets with Imperfect Enforcement and Banking," Department of Economics - Working Papers Series 917, The University of Melbourne.
- Tobias Kronenberg, 2008. "Should We Worry About The Failure Of The Hotelling Rule?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 774-793, 09.
- Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2000.
"Markets for Clean Air,"
Cambridge University Press, number 9780521660839, October.
- Paul Leiby & Jonathan Rubin, 2001. "Intertemporal Permit Trading for the Control of Greenhouse Gas Emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 19(3), pages 229-256, July.
- Junsoo Lee & Mark C. Strazicich, 2013.
"Minimum LM unit root test with one structural break,"
AccessEcon, vol. 33(4), pages 2483-2492.
- Junsoo Lee & Mark C. Strazicich, 2004. "Minimum LM Unit Root Test with One Structural Break," Working Papers 04-17, Department of Economics, Appalachian State University.
- Pindyck, Robert S, 1993.
"The Present Value Model of Rational Commodity Pricing,"
Royal Economic Society, vol. 103(418), pages 511-30, May.
- Robert S. Pindyck, 1992. "The Present Value Model of Rational Commodity Pricing," NBER Working Papers 4083, National Bureau of Economic Research, Inc.
- Pindyck, Robert S., 1991. "The present value model of rational commodity pricing," Working papers 3354-91., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Matti Liski & Juan-Pablo Montero, 2006. "On Pollution Permit Banking and Market Power," Journal of Regulatory Economics, Springer, vol. 29(3), pages 283-302, 05.
- Schleich, Joachim & Ehrhart, Karl-Martin & Hoppe, Christian & Seifert, Stefan, 2004.
"Banning banking in EU emissions trading?,"
Sonderforschungsbereich 504 Publications
04-60, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Ehrhart, Karl-Martin & Hoppe, Christian & Schleich, Joachim & Seifert, Stefan, 2004. "The role of auctions and forward markets in the EU," Sonderforschungsbereich 504 Publications 04-59, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Godby, Robert W. & Mestelman, Stuart & Muller, R. Andrew & Welland, J. Douglas, 1997.
"Emissions Trading with Shares and Coupons when Control over Discharges Is Uncertain,"
Journal of Environmental Economics and Management,
Elsevier, vol. 32(3), pages 359-381, March.
- Stuart Mestelman & Andrew Muller, 1997. "Emissions Trading with Shares and Coupons when Control over Discharges is Uncertain," McMaster Experimental Economics Laboratory Publications 1997-01, McMaster University.
- Juan-Pablo Montero, 2002.
"The Temporal Efficiency of SO2 Emissions Trading,"
Documentos de Trabajo
225, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Rubin, Jonathan D., 1996. "A Model of Intertemporal Emission Trading, Banking, and Borrowing," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 269-286, November.
- Margaret E. Slade & Henry Thille, 1997. "Hotelling Confronts CAPM: A Test of the Theory of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 685-708, August.
- Junsoo Lee & Mark Strazicich, 2001. "Testing the null of stationarity in the presence of a structural break," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 377-382.
- Grubb, M. & Neuhoff, K., 2006. "Allocation and competitiveness in the EU emissions trading scheme: policy overview," Cambridge Working Papers in Economics 0645, Faculty of Economics, University of Cambridge.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Williams).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.