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Emissions Compliances and Carbon Prices under the EU ETS: A Country Specific Analysis of Industrial Sectors

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  • Alberola, Emilie
  • Chevallier, Julien
  • Chèze, Benoît

Abstract

This article critically examines the impact of industrial production for sectors covered by the EU Emissions Trading Scheme (EU ETS) on emissions allowance spot prices during Phase I (2005-2007). We find evidence that the effect of industrial production activity on EU carbon price changes shall be analysed in conjunction with production peaks and compliance net short/long positions. The results extend previous literature by showing that carbon price changes react not only to energy prices forecast errors and extreme temperature events, but also to industrial production in two sectors covered by the EU ETS: combustion and iron. Based on a country-specific analysis, after disentangling the effects of industrial production peaks and CO2 emissions compliance at the EU 24 level, we capture the effects of the variation of industrial production on EU carbon price changes in Germany, Poland, Spain and the UK.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 31 (2009)
Issue (Month): 3 (May)
Pages: 446-462

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Handle: RePEc:eee:jpolmo:v:31:y:2009:i:3:p:446-462

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Web page: http://www.elsevier.com/locate/inca/505735

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Keywords: EU ETS Emissions Trading Carbon pricing CO2 emissions Industrial production;

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  1. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
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