Understanding the link between aggregated industrial production and the carbon price
AbstractThis chapter assesses the extent to which economic activity and the carbon price are linked. Carbon price drivers can be mainly related to energy and institutional variables. However, the influence of the macroeconomic environment shall not be undermined. Various approaches exist in the literature, which favor financial market variables over macroeconomic variables. Following a review of the state of the EU ETS, the main channel of transmission between the variation of macroeconomic activity and the carbon price is recalled, by using the aggregated industrial production as a proxy. An original empirical application unfolds, by studying the carbon-macroeconomy relationship in the threshold VAR model during 2005-2013. Further research is called upon in nonlinear econometrics.
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Date of creation: Jul 2013
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Publication status: Published, The Economics of Green Energy and Efficiency, Springer (Ed.), 2013, 1-22
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Carbon Price ; Economic Activity ; Industrial Production ; Nonlinear Time Series;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-05 (All new papers)
- NEP-ENE-2013-08-05 (Energy Economics)
- NEP-ENV-2013-08-05 (Environmental Economics)
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