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Emission Price Dynamics

In: Environmental Finance and Investments

Author

Listed:
  • Marc Chesney

    (University of Zurich)

  • Jonathan Gheyssens

    (United Nations Environmental Programme Financial Initiative (UNEP FI))

  • Anca Claudia Pana

    (University of Zurich)

  • Luca Taschini

    (London School of Economics and Political Sciences and Grantham Research Institute on Climate Change and the Environment)

Abstract

Since the creation of the European Union Emissions Trading Scheme (EU ETS) in 2005, a burgeoning academic literature has emerged to identify the key price drivers of European Union Allowances. This chapter overviews the main econometric studies that investigate energy prices, weather events, and macroeconomic shocks as determinants of allowance prices. A coal-to-gas switching model is introduced and calibrated to real data. Given the importance of understanding the emission permit price formation, this remaining of this chapter provides an overview of deterministic and stochastic equilibrium permit price models suggested in the literature. Several market design institutions are considered. Banking and borrowing limitations, strategic trading interactions, and asymmetric information in the permit market are the most relevant.

Suggested Citation

  • Marc Chesney & Jonathan Gheyssens & Anca Claudia Pana & Luca Taschini, 2016. "Emission Price Dynamics," Springer Texts in Business and Economics, in: Environmental Finance and Investments, edition 2, chapter 7, pages 159-197, Springer.
    • Handle: RePEc:spr:sptchp:978-3-662-48175-2_7
    DOI: 10.1007/978-3-662-48175-2_7
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