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Forecasting Day-Ahead Carbon Price by Modelling Its Determinants Using the PCA-Based Approach

Author

Listed:
  • Katarzyna Rudnik

    (Faculty of Production Engineering and Logistics, Opole University of Technology, 45-758 Opole, Poland)

  • Anna Hnydiuk-Stefan

    (Faculty of Production Engineering and Logistics, Opole University of Technology, 45-758 Opole, Poland)

  • Aneta Kucińska-Landwójtowicz

    (Faculty of Production Engineering and Logistics, Opole University of Technology, 45-758 Opole, Poland)

  • Łukasz Mach

    (Faculty of Economics and Management, Opole University of Technology, 45-036 Opole, Poland)

Abstract

Accurate price forecasts on the EU ETS market are of interest to many production and investment entities. This paper describes the day-ahead carbon price prediction based on a wide range of fuel and energy indicators traded on the Intercontinental Exchange market. The indicators are analyzed in seven groups for individual products (power, natural gas, coal, crude, heating oil, unleaded gasoline, gasoil). In the proposed approach, by combining the Principal Component Analysis (PCA) method and various methods of supervised machine learning, the possibilities of prediction in the period of rapid price increases are shown. The PCA method made it possible to reduce the number of variables from 37 to 4, which were inputs for predictive models. In the paper, these models are compared: regression trees, ensembles of regression trees, Gaussian Process Regression (GPR) models, Support Vector Machines (SVM) models and Neural Network Regression (NNR) models. The research showed that the Gaussian Process Regression model turned out to be the most advantageous and its price prediction can be considered very accurate.

Suggested Citation

  • Katarzyna Rudnik & Anna Hnydiuk-Stefan & Aneta Kucińska-Landwójtowicz & Łukasz Mach, 2022. "Forecasting Day-Ahead Carbon Price by Modelling Its Determinants Using the PCA-Based Approach," Energies, MDPI, vol. 15(21), pages 1-23, October.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:21:p:8057-:d:957622
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    References listed on IDEAS

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