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CO2 Prices, Energy and Weather

Author

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  • Maria Mansanet-Bataller
  • Angel Pardo
  • Enric Valor

Abstract

One of the main objectives of the European Union Emission Trading Scheme is the establishment of a market price level for allowances that show to European CO2 emitting installations the environmental impact of their polluting activities. The aim of this paper is to focus on the daily price changes during 2005 in an attempt to examine the underlying rationality of pricing behaviour. Specifically, we study the effect of those weather and non-weather variables that academic and market agents consider as the major determinants of the of CO2 price levels. The results show that the energy sources are the principal factors in the determination of CO2 price levels, and that only extreme temperatures influence them.

Suggested Citation

  • Maria Mansanet-Bataller & Angel Pardo & Enric Valor, 2007. "CO2 Prices, Energy and Weather," The Energy Journal, , vol. 28(3), pages 73-92, July.
    • Handle: RePEc:sae:enejou:v:28:y:2007:i:3:p:73-92
    DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-5
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    References listed on IDEAS

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    1. Stevenson Maxwell J & Moreira do Amaral Luiz Felipe & Peat Maurice, 2006. "Risk Management and the Role of Spot Price Predictions in the Australian Retail Electricity Market," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(3), pages 1-25, September.
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    Cited by:

    1. Ping Wei & Jingzi Zhou & Xiaohang Ren & Luu Duc Toan Huynh, 2025. "Financialisation of the European Union Emissions Trading System and its influencing factors in quantiles," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 925-940, January.
    2. Abakah, Emmanuel Joel Aikins & Shao, David Xuefeng & Tiwari, Aviral Kumar & Lee, Chien-Chiang, 2024. "Asymmetric relationship between carbon market and energy markets," Energy, Elsevier, vol. 313(C).
    3. Chen, Zhang-Hangjian & Chu, Wei-Wei & Gao, Xiang & Koedijk, Kees G. & Xu, Yaping, 2024. "Extreme weather, climate risk, and the lead–lag role of carbon," Global Finance Journal, Elsevier, vol. 61(C).
    4. Amaddeo, Elsa & Bergantino, Angela Stefania & Magazzino, Cosimo, 2025. "Who pays for the EU Emission Trading System? The risk of shifting tax burden from firm to final consumer," Energy Economics, Elsevier, vol. 143(C).
    5. Maneejuk, Paravee & Huang, Wucaihong & Yamaka, Woraphon, 2025. "Asymmetric volatility spillover effects from energy, agriculture, green bond, and financial market uncertainty on carbon market during major market crisis," Energy Economics, Elsevier, vol. 145(C).
    6. Huang, Wenyang & Wang, Yizhi, 2024. "Identifying price bubbles in global carbon markets: Evidence from the SADF test, GSADF test and LPPLS method," Energy Economics, Elsevier, vol. 134(C).
    7. Yingying Xu & Xiang Li, 2023. "Green or grey stocks? Dynamic effects of carbon markets based on Chinese practices," Empirical Economics, Springer, vol. 65(6), pages 2521-2547, December.
    8. Li, Jingbo & Chen, Zhang-Hangjian & Gao, Xiang & Huisman, Ronald & Koedijk, Kees, 2024. "Lead-lag relations between the Chinese carbon and energy markets: Evidence from extreme climate shocks," Finance Research Letters, Elsevier, vol. 70(C).
    9. Mohammadehsan Eslahi & Paolo Mazza, 2023. "Can weather variables and electricity demand predict carbon emissions allowances prices? Evidence from the first three phases of the EU ETS," Post-Print hal-04282454, HAL.

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