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Profiting from Regulation: An Event Study of the EU Carbon Market

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  • Bushnell, James
  • Mansur, Erin T.
  • Chong, Howard G.

Abstract

We investigate the effect of cap-and-trade regulation of CO2 on firm profits by performing an event study of a CO2 price crash in the EU market. We examine returns for 90 stocks from carbon intensive industries and 600 stocks in the broad EUROSTOXX index. Firms in carbon intensive, or electricity intensive industries, but not involved in international trade were most hurt by the event. �This implies investors were focused on product price impacts, rather than compliance costs. We find evidence that firms’ net allowance positions also strongly influenced the share price response to the decline in allowance prices.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p12737-2011-04-06.pdf
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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 32737.

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Date of creation: 15 Dec 2010
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Handle: RePEc:isu:genres:32737

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Keywords: Emissions Markets; Incidence of Taxation; Event Study;

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  1. A. Lans Bovenberg & Lawrence H. Goulder, 2001. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 45-90 National Bureau of Economic Research, Inc.
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Cited by:
  1. Stocking, Andrew, 2010. "Unintended Consequences of Price Controls: An Application to Allowance Markets," MPRA Paper 25559, University Library of Munich, Germany.
  2. Marion, Justin & Muehlegger, Erich, 2010. "Fuel Tax Incidence and Supply Conditions," Working Paper Series rwp10-014, Harvard University, John F. Kennedy School of Government.
  3. Stephen P. Holland & Michael R. Moore, 2012. "Market Design in Cap and Trade Programs: Permit Validity and Compliance Timing," NBER Working Papers 18098, National Bureau of Economic Research, Inc.
  4. Managi, Shunsuke & Okimoto, Tatsuyoshi, 2013. "Does the price of oil interact with clean energy prices in the stock market?," Japan and the World Economy, Elsevier, vol. 27(C), pages 1-9.

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