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Modelling the price spread between EUA and CER carbon prices

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  • Nazifi, Fatemeh
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    Abstract

    This paper identifies factors impacting on the dynamics of the price spread between European Allowances (EUAs) and Certified Emission Reductions (CERs) by detecting changes in the structural relationship between them. While prior studies have assumed a fixed structural relationship, this paper analyses the dynamic evolution of the price spread by employing a time-varying parameter analysis using daily data from March 2008 to September 2011. The analysis reveals that a lack of competitive conditions in markets, access constraints on the use and the availability of CERs, regulatory changes regarding both EUAs and CERs, and uncertainty surrounding CERs can explain a significant portion of the price spread.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 56 (2013)
    Issue (Month): C ()
    Pages: 434-445

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    Handle: RePEc:eee:enepol:v:56:y:2013:i:c:p:434-445

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

    Related research

    Keywords: Price spread; EU ETS; Time-varying parameter analysis;

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    Cited by:
    1. Rita Sousa & Luís Aguiar-Conraria, 2014. "Dynamics of CO2 price drivers," NIPE Working Papers 02/2014, NIPE - Universidade do Minho.
    2. Ari, İzzet, 2013. "Voluntary emission trading potential of Turkey," Energy Policy, Elsevier, vol. 62(C), pages 910-919.
    3. Medina, Vicente & Pardo, Ángel & Pascual, Roberto, 2014. "The timeline of trading frictions in the European carbon market," Energy Economics, Elsevier, vol. 42(C), pages 378-394.

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