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The Role of Banks in EU Emissions Trading

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  • Johanna Cludius
  • Regina Betz

Abstract

This paper is an empirical investigation of the role of banks in the EU Emissions Trading System (EU ETS). This topic is of particular interest considering that banks are responsible for a large and increasing share of overall transactions under the EU ETS and that they provide regulated companies with services related to emissions trading. Using both semi-structured interviews as well as descriptive and regression analysis, we investigated the different roles banks play in EU emissions trading and whether their importance as trading partners differs in relation to different types of regulated companies. Our regressions based on data from the first trading period of the EU ETS show that large companies with trading experience are more likely to choose a trading strategy involving interaction with a range of financial intermediaries, in particular banks or exchanges, than smaller, less professionalized companies, which tend to follow a trading strategy involving brokers (in particular for selling allowances). These findings can help policymakers decide on the level of involvement of non-regulated companies in their systems, which is currently allowed to varying degrees under different ETS. We recommend that this decision should be closely linked to provisions of market oversight and the level of control over the different types of financial players active in emissions trading.

Suggested Citation

  • Johanna Cludius & Regina Betz, 2020. "The Role of Banks in EU Emissions Trading," The Energy Journal, , vol. 41(2), pages 275-300, March.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:2:p:275-300
    DOI: 10.5547/01956574.41.2.jclu
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    References listed on IDEAS

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    1. JÅ«ratÄ— JaraitÄ— & Corrado Di Maria, 2016. "Did the EU ETS Make a Difference? An Empirical Assessment Using Lithuanian Firm-Level Data," The Energy Journal, , vol. 37(2), pages 68-92, April.
    2. Johanna Cludius, 2018. "Winners and Losers of EU Emissions Trading: Insights from the EUTL Transfer Dataset," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
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    More about this item

    Keywords

    EU ETS; Banks; Trading strategy; EUTL;
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