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Regime-dependent Assessment of Risk Concerning the International Aviation Inclusion Into the EU ETS

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  • Aneta Wlodarczyk

    (Czestochowa University of Technology)

Abstract

In this article the European Union Aviation Allowances (EUAA) price risk, associated with the activity of aircraft operators within the European Economic Area (EEA), has been evaluated across the low and high volatility periods occurring on the carbon permits market. It is found that Markov-switching heteroscedasticity models distinguish well between two volatility regimes, as well as three volatility regimes on the EUAA futures market, and that the assess-ments of EUAA price risk are clearly different in the regimes. These findings may be explained by the European Union Emission Trading Scheme (EU ETS) design and the changes in both the EU climate policy rules and global regulations in the scope of CO2 emissions by international aviation.

Suggested Citation

  • Aneta Wlodarczyk, 2017. "Regime-dependent Assessment of Risk Concerning the International Aviation Inclusion Into the EU ETS," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 17, pages 129-145.
    • Handle: RePEc:cpn:umkdem:v:17:y:2017:p:129-145
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    References listed on IDEAS

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    More about this item

    Keywords

    European Union Aviation Allowances; EU Emission Trading Scheme; Markov-switching model; risk;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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