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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. repec:aen:eeepjl:eeep7-2-cludius is not listed on IDEAS
    2. repec:aen:journl:ej37-1-jaraite is not listed on IDEAS
    3. Georg Zachmann & Anta Ndoye & Jan Abrell, 2011. "Assessing the impact of the EU ETS using firm level data," Bruegel Working Papers 579, Bruegel.
    4. Ying Fan & Yin-Peng Liu & Jian-Feng Guo, 2016. "How to explain carbon price using market micro-behaviour?," Applied Economics, Taylor & Francis Journals, vol. 48(51), pages 4992-5007, November.
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    Cited by:

    1. Andrea Flori & Alessandro Spelta, 2025. "Carbon trade biases and the emerging mesoscale structure of the European Emissions Trading System network," Nature Communications, Nature, vol. 16(1), pages 1-17, December.
    2. Perino, Grischa, 2024. "Carbon market design and market sentiment," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
    3. St'ephane Cr'epey & Samuel Drapeau & Mekonnen Tadese, 2025. "Comparison of Tax and Cap-and-Trade Carbon Pricing Schemes," Papers 2510.15941, arXiv.org.
    4. Ayodeji Emmanuel Oke & Abiola Oluwasogo Oyediran & Gbemisola Koriko & Liyaning Maggie Tang, 2024. "Carbon trading practices adoption for sustainable construction: A study of the barriers in a developing country," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(1), pages 1120-1136, February.
    5. Flori, Andrea & Scotti, Francesco, 2025. "When the intensity of trading meets compliance requirements: An assessment for firms operating within the EU ETS," Energy Economics, Elsevier, vol. 147(C).
    6. 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.
    7. Lehmann, Sascha & Schleich, Joachim, 2025. "Exploring internal trading in the EU emissions trading system: An empirical analysis," Energy Economics, Elsevier, vol. 152(C).

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