Rockets and feathers in power futures markets? Evidence from the second phase of the EU ETS
This paper examines the possibility of asymmetric transmission of CO2 prices to electricity futures prices in the second phase of the European Emission Trading Scheme. We would like to assess whether output prices tend to respond more quickly to input price increases than decreases: this phenomenon is known as “rockets and feathers” in the literature. Compared to Zachmann and von Hirschhausen (2008), who carried out a similar analysis for Germany in the first phase of the Emission Trading Scheme with data from 2005 to 2006, our study spans a longer timeframe (July 2007–June 2010), with a presumably more mature permit market, and includes three additional European countries (France, Belgium and the Netherlands). Results do not provide empirical evidence of statistically significant differences in the response of power prices to positive and negative shocks in CO2 allowance and fuel markets.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Antje Berndt & Rohan Douglas & Darrell Duffie & Mark Ferguson, "undated".
"Measuring Default Risk Premia from Default Swap Rates and EDFs,"
GSIA Working Papers
2006-E31, Carnegie Mellon University, Tepper School of Business.
- Antje Berndt & Rohan Douglas & Darrell Duffie & Mark Ferguson & David Schranz, 2005. "Measuring default risk premia from default swap rates and EDFs," BIS Working Papers 173, Bank for International Settlements.
- Hintermann, Beat, 2010. "Allowance price drivers in the first phase of the EU ETS," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 43-56, January.
- Beat Hintermann, 2009. "Allowance Price Drivers in the First Phase of the EU ETS," CEPE Working paper series 09-63, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Crespo Cuaresma, Jesús & Hlouskova, Jaroslava & Kossmeier, Stephan & Obersteiner, Michael, 2004. "Forecasting electricity spot-prices using linear univariate time-series models," Applied Energy, Elsevier, vol. 77(1), pages 87-106, January.
- Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, 04.
- Matteo Manera & Giliola Frey, 2005. "Econometric Models of Asymmetric Price Transmission," Working Papers 2005.100, Fondazione Eni Enrico Mattei.
- Keppler, Jan Horst & Mansanet-Bataller, Maria, 2010. "Causalities between CO2, electricity, and other energy variables during phase I and phase II of the EU ETS," Energy Policy, Elsevier, vol. 38(7), pages 3329-3341, July.
- Barry Anderson & Jörg Leib & Ralf Martin & Marty McGuigan & Mirabelle Muuls & Laure de Preux & Ulrich J. Wagner, 2011. "Climate change policy and business in Europe: evidence from interviewing managers," LSE Research Online Documents on Economics 47493, London School of Economics and Political Science, LSE Library.
- Barry Anderson & Jorg Leib & Ralf Martin & Marty McGuigan & Mirabelle Muûls & Ulrich J. Wagner & Laure B. de Preux, 2011. "Climate Change Policy and Business in Europe. Evidence from Interviewing Managers," CEP Occasional Papers 027, Centre for Economic Performance, LSE.
- Knittel, Christopher R. & Roberts, Michael R., 2005. "An empirical examination of restructured electricity prices," Energy Economics, Elsevier, vol. 27(5), pages 791-817, September.
- Zachmann, Georg & von Hirschhausen, Christian, 2008. "First evidence of asymmetric cost pass-through of EU emissions allowances: Examining wholesale electricity prices in Germany," Economics Letters, Elsevier, vol. 99(3), pages 465-469, June.
- Georg Zachmann & Christian von Hirschhausen, 2007. "First Evidence of Asymmetric Cost Pass-Through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany," Working Papers 0710, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Georg Zachmann & Christian von Hirschhausen, 2007. "First Evidence of Asymmetric Cost Pass-through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany," Discussion Papers of DIW Berlin 708, DIW Berlin, German Institute for Economic Research.
- Cook, Steven & Holly, Sean & Turner, Paul, 1999. "The power of tests for non-linearity: the case of Granger-Lee asymmetry," Economics Letters, Elsevier, vol. 62(2), pages 155-159, February.
- Harrison Fell, 2010. "EU-ETS and Nordic Electricity: A CVAR Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-26.
- Botterud, Audun & Kristiansen, Tarjei & Ilic, Marija D., 2010. "The relationship between spot and futures prices in the Nord Pool electricity market," Energy Economics, Elsevier, vol. 32(5), pages 967-978, September.
- Geweke, John F, 1978. "Temporal Aggregation in the Multiple Regression Model," Econometrica, Econometric Society, vol. 46(3), pages 643-661, May.
- Marc Gronwald & Janina Ketterer, 2009. "Evaluating Emission Trading as a Policy Tool - Evidence from Conditional Jump Models," CESifo Working Paper Series 2682, CESifo Group Munich.
- Haldrup, Niels & Nielsen, Morten Orregaard, 2006. "A regime switching long memory model for electricity prices," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 349-376.
- Niels Haldrup & Morten O. Nielsen, 2004. "A Regime Switching Long Memory Model for Electricity Prices," Economics Working Papers 2004-2, Department of Economics and Business Economics, Aarhus University.
- Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.
- Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," NBER Working Papers 13189, National Bureau of Economic Research, Inc.
- Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
- Sam Peltzman, 1998. "Prices Rise Faster Than They Fall," University of Chicago - George G. Stigler Center for Study of Economy and State 142, Chicago - Center for Study of Economy and State.
- Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "An overview of current research on EU ETS: Evidence from its operating mechanism and economic effect," Applied Energy, Elsevier, vol. 87(6), pages 1804-1814, June.
- Yue-Jun Zhang & Yi-Ming Wei, 2009. "An overview of current research on EU ETS: Evidence from its operating mechanism and economic effect," CEEP-BIT Working Papers 3, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
- Hendrik Bessembinder & Michael L. Lemmon, 2002. "Equilibrium Pricing and Optimal Hedging in Electricity Forward Markets," Journal of Finance, American Finance Association, vol. 57(3), pages 1347-1382, 06.
- Matti Liski & Juan-Pablo Montero, 2006. "On Pollution Permit Banking and Market Power," Journal of Regulatory Economics, Springer, vol. 29(3), pages 283-302, 05.
- Jochen Meyer & Stephan Cramon-Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611.
- Meyer, Jochen & von Cramon-Taubadel, Stephan, 2002. "Asymmetric Price Transmission: A Survey," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24822, European Association of Agricultural Economists.
- Christoph Bohringer & Tim Hoffmann & Andreas Lange & Andreas Loschel & Ulf Moslener, 2005. "Assessing Emission Regulation in Europe: An Interactive Simulation Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-22.
- Haldrup Niels & Nielsen Morten Ø., 2006. "Directional Congestion and Regime Switching in a Long Memory Model for Electricity Prices," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(3), pages 1-24, September.
- Haldrup; Niels & Morten Oerregaard Nielsen, 2005. "Directional Congestion and Regime Switching in a Long Memory Model for Electricity Prices," Economics Working Papers 2005-18, Department of Economics and Business Economics, Aarhus University.
- repec:dau:papers:123456789/4227 is not listed on IDEAS
- Lance J. Bachmeier & James M. Griffin, 2003. "New Evidence on Asymmetric Gasoline Price Responses," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 772-776, August.
- Lance J. Bachmeier & James M. Griffin, "undated". "New Evidence on Asymmetric Gasoline Price Responses," Working Papers 0208, East Carolina University, Department of Economics.
- Davidson, Russell & MacKinnon, James G, 1999. "Bootstrap Testing in Nonlinear Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 487-508, May.
- Davidson, R. & Mackinnon, J.G., 1997. "Bootstrap Testing in Nonlinear Models," G.R.E.Q.A.M. 97a39, Universite Aix-Marseille III.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 305-339.
- Severin Borenstein & A. Colin Cameron, 1992. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," NBER Working Papers 4138, National Bureau of Economic Research, Inc.
- Worthington, Andrew & Kay-Spratley, Adam & Higgs, Helen, 2005. "Transmission of prices and price volatility in Australian electricity spot markets: a multivariate GARCH analysis," Energy Economics, Elsevier, vol. 27(2), pages 337-350, March.
- Andrew C. Worthington & Adam Kay-Spratley & Helen Higgs, 2002. "Transmission of prices and price volatility in Australian electricity spot markets: A multivariate GARCH analysis," School of Economics and Finance Discussion Papers and Working Papers Series 114, School of Economics and Finance, Queensland University of Technology.
- Grasso, Margherita & Manera, Matteo, 2007. "Asymmetric error correction models for the oil-gasoline price relationship," Energy Policy, Elsevier, vol. 35(1), pages 156-177, January.
- Matteo Manera & Margherita Grasso, 2005. "Asymmetric Error Correction Models for the Oil-Gasoline Price Relationship," Working Papers 2005.75, Fondazione Eni Enrico Mattei.
- Goto, Mika & Karolyi, G. Andrew, 2004. "Understanding Electricity Price Volatility within and across Markets," Working Paper Series 2004-12, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Galeotti, Marzio & Lanza, Alessandro & Manera, Matteo, 2003. "Rockets and feathers revisited: an international comparison on European gasoline markets," Energy Economics, Elsevier, vol. 25(2), pages 175-190, March.
- M. Galeotti & A. Lanza & M. Manera, 2001. "Rockets and feathers revisited: an international comparison on European gasoline markets," Working Paper CRENoS 200112, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
- Beat Hintermann, 2011. "Market Power, Permit Allocation and Efficiency in Emission Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(3), pages 327-349, July.
- Steven Cook & Sean Holly & Paul Turner, 1999. "DHSY revisited: the role of asymmetries," Applied Economics, Taylor & Francis Journals, vol. 31(7), pages 775-778.
- Rafal Weron & Adam Misiorek, 2005. "Forecasting Spot Electricity Prices With Time Series Models," Econometrics 0504001, EconWPA.
- Claudia Kettner & Angela Köppl & Stefan Schleicher, 2010. "The EU Emission Trading Scheme. Insights from the First Trading Years with a Focus on Price Volatility," WIFO Working Papers 368, WIFO.
- Redl, Christian & Haas, Reinhard & Huber, Claus & Böhm, Bernhard, 2009. "Price formation in electricity forward markets and the relevance of systematic forecast errors," Energy Economics, Elsevier, vol. 31(3), pages 356-364, May.
- Chevallier, Julien, 2010. "Modelling risk premia in CO2 allowances spot and futures prices," Economic Modelling, Elsevier, vol. 27(3), pages 717-729, May.
- Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-708, May.
- Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
- Steven Cook & Sean Holly & Paul Turner, 2000. "The Power of Tests for Non-Linearity: The Escribano–Pfann Model," Computational Economics, Springer;Society for Computational Economics, vol. 15(3), pages 223-226, June.
- repec:dau:papers:123456789/5269 is not listed on IDEAS
- Derek W. Bunn & Carlo Fezzi, 2007. "Interaction of European Carbon Trading and Energy Prices," Working Papers 2007.63, Fondazione Eni Enrico Mattei.
- Francis A. Longstaff & Ashley W. Wang, 2004. "Electricity Forward Prices: A High-Frequency Empirical Analysis," Journal of Finance, American Finance Association, vol. 59(4), pages 1877-1900, 08.
- Steven Cook, 1999. "Nonsymmetric error correction revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 6(7), pages 467-470.
- Rafal Weron, 2006. "Modeling and Forecasting Electricity Loads and Prices: A Statistical Approach," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0601, December.
- Kempf, Alexander & Korn, Olaf & Uhrig-Homburg, Marliese, 2012. "The term structure of illiquidity premia," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1381-1391.
- Rafal Weron & Adam Misiorek, 2006. "Short-term electricity price forecasting with time series models: A review and evaluation," HSC Research Reports HSC/06/01, Hugo Steinhaus Center, Wroclaw University of Technology.
- Fatemeh Nazifi & George Milunovich, 2010. "Measuring the Impact of Carbon Allowance Trading on Energy Prices," Energy & Environment, , vol. 21(5), pages 367-383, September.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July. Full references (including those not matched with items on IDEAS)