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European carbon prices fundamentals in 2005-2007: the effects of energy markets, temperatures and sectorial production

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  • Emilie Alberola
  • Julien Pierre Chevallier
  • Benoît Chèze

Abstract

This article aims at characterizing the daily price fundamentals of European Union Allowances (EUAs) traded since 2005 as part of the Emissions Trading Scheme (ETS). First, the presence of two structural changes on April, 2006 following the disclosure of 2005 verified emissions and on October, 2006 following the European Commission announcement of stricter Phase II allocation allow to isolate distinct fundamentals evolving overtime. The results extend previous literature by showing that spot prices react not only to other energy markets and temperatures, but also to economic activity within the main sectors covered by the EU ETS such as proxied by sectoral production indices. Besides, the sub-period decomposition of the pilot phase gives a better grasp of institutional and market events that drive allowance price changes.

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File URL: http://economix.fr/pdf/dt/2007/WP_EcoX_2007-33.pdf
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Bibliographic Info

Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2007-33.

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Length: 34 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:drm:wpaper:2007-33

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Keywords: Carbon Emissions Trading; Market Price Fundamentals; EU ETS;

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  1. Junsoo Lee & Mark C. Strazicich, 2004. "Minimum LM Unit Root Test with One Structural Break," Working Papers 04-17, Department of Economics, Appalachian State University.
  2. Springer, Urs, 2003. "The market for tradable GHG permits under the Kyoto Protocol: a survey of model studies," Energy Economics, Elsevier, vol. 25(5), pages 527-551, September.
  3. Derek W. Bunn & Carlo Fezzi, 2007. "Interaction of European Carbon Trading and Energy Prices," Working Papers 2007.63, Fondazione Eni Enrico Mattei.
  4. Junsoo Lee & Mark Strazicich, 2001. "Testing the null of stationarity in the presence of a structural break," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 377-382.
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Cited by:
  1. Creti, Anna & Jouvet, Pierre-André & Mignon, Valérie, 2012. "Carbon price drivers: Phase I versus Phase II equilibrium?," Energy Economics, Elsevier, vol. 34(1), pages 327-334.

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