What Moves the European Carbon Market? - Insights from Conditional Jump Models
AbstractThis paper is concerned with carbon price volatility and the underlying causes of large price movements in the European emissions trading market. Based on the application of a combined jump-GARCH model the behavior of EUA prices is characterized. The jump-GARCH model explains the unsteady carbon price movement well and, moreover, shows that between 40 and 60 percent of the carbon price variance are triggered by jumps. Information regarding EUA supply and news from international carbon markets are identified as importantdrivers of these price spikes. These results can lead regulators the way if smoother carbon prices are desired.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3795.
Date of creation: 2012
Date of revision:
emission allowance prices; GARCH; jumps; jump-induced variance;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
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