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Are carbon trading markets efficient? A longitudinal investigation

Author

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  • Ajith Venugopal
  • Natalia Diniz-Maganini
  • Abdul A. Rasheed

Abstract

We examine the evolution of price efficiency in the European Union Carbon Emissions Market and the net cross-correlations between the carbon and commodities markets using Multifractal Detrended Fluctuation Analysis (MFDFA), and Detrended Partial Cross-Correlation Analysis (DPCCA), methods based on dynamic systems derived from econophysics. Our analysis is based on daily values of the S&P GSCI Carbon Emission Allowances (EUA) EUR index and the S&P GSCI index for the period between January 2010 and June 2024 and uses seven-year rolling windows. Our results are supportive of the adaptive market hypothesis and indicate that the efficiency of the EU ETS markets has been improving steadily and that its correlation with the broader commodities market is increasing over time.

Suggested Citation

  • Ajith Venugopal & Natalia Diniz-Maganini & Abdul A. Rasheed, 2026. "Are carbon trading markets efficient? A longitudinal investigation," Applied Economics, Taylor & Francis Journals, vol. 58(2), pages 348-362, January.
    • Handle: RePEc:taf:applec:v:58:y:2026:i:2:p:348-362
    DOI: 10.1080/00036846.2025.2453247
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