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How integrated is the European carbon derivatives market?

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  • Petitjean, Mikael

Abstract

We assess the integration dynamics on the European carbon futures market at both the intraday and daily levels. We focus on EUA futures contracts that can be traded on three trading platforms: the Intercontinental-European Climate Exchange (ICE-ECX), the NASDAQ OMX and the European Energy Exchange (EEX). We analyze trading activity for three contract maturities and find that the ECX and EEX platforms exhibit a reasonable level of integration. The price discovery process does not occur at the daily level but rather at the hourly frequency. We conclude that this market still needs to be closely monitored by the regulatory authorities.
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Suggested Citation

  • Petitjean, Mikael, 2015. "How integrated is the European carbon derivatives market?," LIDAM Reprints LFIN 2015004, Université catholique de Louvain, Louvain Finance (LFIN).
    • Handle: RePEc:ajf:louvlr:2015004
    Note: In : Finance Research Letters, Vol. 15, no.1, p. 18-30 (2015)
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    Cited by:

    1. Xianzi Yang & Chen Zhang & Yu Yang & Wenjun Wang & Zulfiqar Ali Wagan, 2022. "A new risk measurement method for China's carbon market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1280-1290, January.
    2. Lyu, Chenyan, 2021. "Regional Carbon Markets in China: Cointegration and Heterogeneity," Working Papers 13-2021, Copenhagen Business School, Department of Economics.
    3. Lyu, Chenyan & Scholtens, Bert, 2024. "Integration of the international carbon market: A time-varying analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 191(C).
    4. Federico Galán-Valdivieso & Elena Villar-Rubio & María-Dolores Huete-Morales, 2018. "The erratic behaviour of the EU ETS on the path towards consolidation and price stability," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 18(5), pages 689-706, October.
    5. Guo, Xiaozhu & Huang, Yisu & Liang, Chao & Umar, Muhammad, 2022. "Forecasting volatility of EUA futures: New evidence," Energy Economics, Elsevier, vol. 110(C).
    6. Le, Thai-Ha & Le, Ha-Chi & Taghizadeh-Hesary, Farhad, 2020. "Does financial inclusion impact CO2 emissions? Evidence from Asia," Finance Research Letters, Elsevier, vol. 34(C).

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    More about this item

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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