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First evidence of asymmetric cost pass-through of EU emissions allowances: Examining wholesale electricity prices in Germany

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  • Zachmann, Georg
  • von Hirschhausen, Christian

Abstract

We test the hypothesis that rising prices of emission allowances have a stronger impact on wholesale electricity prices than falling prices (asymmetric cost pass-through). Using an autoregressive distributed lag model, we confirm this hypothesis for the German market.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 99 (2008)
Issue (Month): 3 (June)
Pages: 465-469

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Handle: RePEc:eee:ecolet:v:99:y:2008:i:3:p:465-469

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Web page: http://www.elsevier.com/locate/ecolet

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References

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  1. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
  2. Jochen Meyer & Stephan Cramon-Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611.
  3. Kaufmann, Robert K. & Laskowski, Cheryl, 2005. "Causes for an asymmetric relation between the price of crude oil and refined petroleum products," Energy Policy, Elsevier, vol. 33(12), pages 1587-1596, August.
  4. Matteo Manera & Giliola Frey, 2005. "Econometric Models of Asymmetric Price Transmission," Working Papers 2005.100, Fondazione Eni Enrico Mattei.
  5. Nathan S. Balke & Stephen P. A. Brown & Mine Yücel, 1998. "Crude oil and gasoline prices: an asymmetric relationship?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 2-11.
  6. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
  7. Sijm, J. & Neuhoff, K. & Chen, Y., 2006. "CO2 cost pass through and windfall profits in the power sector," Cambridge Working Papers in Economics 0639, Faculty of Economics, University of Cambridge.
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Citations

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Cited by:
  1. Diego Escobari, 2013. "Asymmetric Price Adjustments in Airlines," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 34(2), pages 74-85, 03.
  2. Harrison Fell & Beat Hintermann & Herman R. J. Vollebergh, 2013. "Carbon Content of Electricity Futures in Phase II of the EU ETS," CESifo Working Paper Series 4367, CESifo Group Munich.
  3. Pahle, Michael & Fan, Lin & Schill, Wolf-Peter, 2011. "How emission certificate allocations distort fossil investments: The German example," Energy Policy, Elsevier, vol. 39(4), pages 1975-1987, April.
  4. Cruciani, Michel & Keppler, Jan Horst, 2010. "Rents in the European Power Sector due to Carbon Trading," Economics Papers from University Paris Dauphine 123456789/2570, Paris Dauphine University.
  5. Frieder Mokinski & Nikolas Wölfing, 2014. "The effect of regulatory scrutiny: Asymmetric cost pass-through in power wholesale and its end," Journal of Regulatory Economics, Springer, vol. 45(2), pages 175-193, April.
  6. Veith, Stefan & Werner, Jörg R. & Zimmermann, Jochen, 2009. "Capital market response to emission rights returns: Evidence from the European power sector," Energy Economics, Elsevier, vol. 31(4), pages 605-613, July.
  7. Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "An overview of current research on EU ETS: Evidence from its operating mechanism and economic effect," Applied Energy, Elsevier, vol. 87(6), pages 1804-1814, June.
  8. Wilfried Ehrenfeld, 2012. "Climate Innovation - The Case of the Central German Chemical Industry," IWH Discussion Papers 2, Halle Institute for Economic Research.
  9. Boris Solier & Pierre-André Jouvet, 2011. "An overview of CO2 cost pass-through to electricity prices in Europe," Working Papers 1108, Chaire Economie du Climat.
  10. Weigt, Hannes & Hirschhausen, Christian von, 2008. "Price formation and market power in the German wholesale electricity market in 2006," Energy Policy, Elsevier, vol. 36(11), pages 4227-4234, November.
  11. Wölfing, Nikolas, 2008. "Asymmetric Price Transmission in Supply Function Equilibrium, Carbon Prices and the German Electricity Spot Market," ZEW Discussion Papers 08-040, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Marc Gronwald & Janina Ketterer & Stefan Trück, 2011. "The Dependence Structure between Carbon Emission Allowances and Financial Markets - A Copula Analysis," CESifo Working Paper Series 3418, CESifo Group Munich.
  13. Pietz, Matthäus, 2009. "Risk premia in electricity wholesale spot markets: empirical evidence from Germany," CEFS Working Paper Series 2009-11, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  14. Tim Laing & Misato Sato & Michael Grubb & Claudia Comberti, 2013. "Assessing the effectiveness of the EU Emissions Trading System," Grantham Research Institute on Climate Change and the Environment Working Papers 106, Grantham Research Institute on Climate Change and the Environment.
  15. Oberndorfer, Ulrich, 2009. "EU Emission Allowances and the stock market: Evidence from the electricity industry," Ecological Economics, Elsevier, vol. 68(4), pages 1116-1126, February.
  16. Wilfried Ehrenfeld, 2012. "Towards a Theory of Climate Innovation - A Model Framework for Analyzing Drivers and Determinants," IWH Discussion Papers 1, Halle Institute for Economic Research.
  17. Carlos Pinho & Mara Madaleno, 2011. "CO 2 emission allowances and other fuel markets interaction," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(3), pages 259-281, September.
  18. Alois Rhiel & Bernhard Heitzer & Berthold A. Bonekamp & Christian von Hirschhausen & Anne Neumann & Hannes Weigt, 2008. "Energiekonzerne: Steigende Umsätze, steigende Gewinne, steigende Preise. Fehlt der Wettbewerb?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(01), pages 03-15, 01.

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