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Rockets and feathers in power futures markets? Evidence from the second phase of the EU ETS

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  • Lo Prete, Chiara
  • Norman, Catherine S.

Abstract

This paper examines the possibility of asymmetric transmission of CO2 prices to electricity futures prices in the second phase of the European Emission Trading Scheme. We would like to assess whether output prices tend to respond more quickly to input price increases than decreases: this phenomenon is known as “rockets and feathers” in the literature. Compared to Zachmann and von Hirschhausen (2008), who carried out a similar analysis for Germany in the first phase of the Emission Trading Scheme with data from 2005 to 2006, our study spans a longer timeframe (July 2007–June 2010), with a presumably more mature permit market, and includes three additional European countries (France, Belgium and the Netherlands). Results do not provide empirical evidence of statistically significant differences in the response of power prices to positive and negative shocks in CO2 allowance and fuel markets.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 36 (2013)
Issue (Month): C ()
Pages: 312-321

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Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:312-321

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

Related research

Keywords: Asymmetric pricing; CO2 prices; Power prices; Error Correction Model; European Emission Trading Scheme;

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Cited by:
  1. 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.
  2. Mokinski, Frieder & Wölfing, Nikolas, 2013. "The effect of regulatory scrutiny asymmetric cost pass-through in power wholesale and its end," ZEW Discussion Papers 13-055, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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