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Do Transaction Costs Influence Firm Trading Behaviour in the European Emissions Trading System?

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  • Jūratė Jaraitė-Kažukauskė
  • Andrius Kažukauskas

Abstract

This study is one of the first to empirically investigate firm trading behaviour and the importance of permit trading transaction costs, such as information costs and search costs, in the first phase of the European Union’s Emissions Trading System (EU ETS). The signs and significance of our constructed transaction costs proxy variables indicate for a presence of these costs in the initial years of the EU ETS. In particular, this paper shows that ETS firms with the smaller number of installations and with less trading experience were less likely to participate in the European emissions trading market and traded the lower quantities of permits. Furthermore, these firms chose to trade permits indirectly via third parties. This study also supports the concerns that transaction costs could be excessive for smaller participants and firms operating in the new EU member states. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Jūratė Jaraitė-Kažukauskė & Andrius Kažukauskas, 2015. "Do Transaction Costs Influence Firm Trading Behaviour in the European Emissions Trading System?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(3), pages 583-613, November.
    • Handle: RePEc:kap:enreec:v:62:y:2015:i:3:p:583-613
    DOI: 10.1007/s10640-014-9831-7
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    3. Estelle Cantillon & Aurélie Slechten, 2023. "Market Design for the Environment," NBER Chapters, in: New Directions in Market Design, National Bureau of Economic Research, Inc.

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