What Moves the European Carbon Market? - Insights from Conditional Jump Models
This paper is concerned with carbon price volatility and the underlying causes of large price movements in the European emissions trading market. Based on the application of a combined jump-GARCH model the behavior of EUA prices is characterized. The jump-GARCH model explains the unsteady carbon price movement well and, moreover, shows that between 40 and 60 percent of the carbon price variance are triggered by jumps. Information regarding EUA supply and news from international carbon markets are identified as importantdrivers of these price spikes. These results can lead regulators the way if smoother carbon prices are desired.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gronwald, Marc, 2012.
"A characterization of oil price behavior — Evidence from jump models,"
Elsevier, vol. 34(5), pages 1310-1317.
- Marc Gronwald, 2011. "A Characterization of Oil Price Behavior - Evidence from Jump Models," CESifo Working Paper Series 3644, CESifo Group Munich.
- Jui-Cheng Hung & Shi-Jie Jiang & Chien-Liang Chiu, 2007. "Jump risk of Presidential election: evidence from Taiwan stock and foreign exchange markets," Applied Economics, Taylor & Francis Journals, vol. 39(17), pages 2231-2240.
- Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2011.
"Combining multiple climate policy instruments: how not to do it,"
LSE Research Online Documents on Economics
37573, London School of Economics and Political Science, LSE Library.
- Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2010. "Combining Multiple Climate Policy Instruments: How Not To Do It," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 209-225.
- Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2011. "Combining multiple climate policy instruments: how not to do it," GRI Working Papers 38, Grantham Research Institute on Climate Change and the Environment.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Karsten Neuhoff & Kim Keats Martinez & Misato Sato, 2006.
"Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector,"
Taylor & Francis Journals, vol. 6(1), pages 73-91, January.
- Neuhoff, K. & Keats, K. & Sato, M., 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Cambridge Working Papers in Economics 0642, Faculty of Economics, University of Cambridge.
- Wing H. Chan & Denise Young, 2006. "Jumping hedges: An examination of movements in copper spot and futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 26(2), pages 169-188, 02.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2010.
"Modeling and explaining the dynamics of European Union allowance prices at high-frequency,"
ZEW Discussion Papers
10-038, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2012. "Modeling and explaining the dynamics of European Union Allowance prices at high-frequency," Energy Economics, Elsevier, vol. 34(1), pages 316-326.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2010. "Modeling and Explaining the Dynamics of European Union Allowance Prices at High-Frequency," Working Papers 0497, University of Heidelberg, Department of Economics.
- Emilie Alberola & Julien Pierre Chevallier, 2007.
"European carbon prices and banking restrictions: evidence from phase I (2005-2007),"
EconomiX Working Papers
2007-32, University of Paris West - Nanterre la Défense, EconomiX.
- Emilie Alberola & Julien Chevallier, 2009. "European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007)," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 51-80.
- Emilie Alberola & Julien Chevallier, 2009. "European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007)," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00649923, HAL.
- Chan, Wing H., 2004. "Conditional correlated jump dynamics in foreign exchange," Economics Letters, Elsevier, vol. 83(1), pages 23-28, April.
- Chevallier, Julien, 2011. "Detecting instability in the volatility of carbon prices," Energy Economics, Elsevier, vol. 33(1), pages 99-110, January.
- repec:dau:papers:123456789/4210 is not listed on IDEAS
- Wing H. Chan, 2003. "A correlated bivariate Poisson jump model for foreign exchange," Empirical Economics, Springer, vol. 28(4), pages 669-685, November.
- Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
- Daskalakis, George & Psychoyios, Dimitris & Markellos, Raphael N., 2009. "Modeling CO2 emission allowance prices and derivatives: Evidence from the European trading scheme," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1230-1241, July.
- Beat Hintermann, 2009.
"Allowance Price Drivers in the First Phase of the EU ETS,"
CEPE Working paper series
09-63, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Hintermann, Beat, 2010. "Allowance price drivers in the first phase of the EU ETS," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 43-56, January.
- repec:dau:papers:123456789/5110 is not listed on IDEAS
- repec:dau:papers:123456789/4596 is not listed on IDEAS
- Chan, Wing H & Maheu, John M, 2002. "Conditional Jump Dynamics in Stock Market Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 377-89, July.
- Chevallier, Julien, 2009. "Carbon futures and macroeconomic risk factors: A view from the EU ETS," Energy Economics, Elsevier, vol. 31(4), pages 614-625, July.
- Lee, Yen-Hsien & Hu, Hsu-Ning & Chiou, Jer-Shiou, 2010. "Jump dynamics with structural breaks for crude oil prices," Energy Economics, Elsevier, vol. 32(2), pages 343-350, March.
- Julien Chevallier, 2012. "Banking And Borrowing In The Eu Ets: A Review Of Economic Modelling, Current Provisions And Prospects For Future Design," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 157-176, 02.
- Marc Gronwald & Janina Ketterer & Stefan Trück, 2011. "The Relationship between Carbon, Commodity and Financial Markets: A Copula Analysis," The Economic Record, The Economic Society of Australia, vol. 87(s1), pages 105-124, 09.
- Alberola, Emilie & Chevallier, Julien & Cheze, Benoi^t, 2008. "Price drivers and structural breaks in European carbon prices 2005-2007," Energy Policy, Elsevier, vol. 36(2), pages 787-797, February.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3795. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.