The European emissions trading scheme (EU-ETS) for CO2 is the largest existing emissions trading scheme in the world. The main reason for the implementation of this scheme is to reach the European Kyoto targets at minimal cost and to establish a price for emissions. The right to emit CO2 therefore becomes a scarce production input. In this paper we want to analyze the determinants of the price for allowances in the EU-ETS and study whether it reacts to fundamental influence factors such as energy prices. The results show, that as long as the market viewed the allowances as a scarce input factor, the price reacts to changes in energy prices and weather variations.
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1387.
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