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European carbon prices fundamentals in 2005-2007: the effects of energy markets, temperatures and sectorial production

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Listed:
  • Emilie Alberola
  • Julien Pierre Chevallier
  • Benoît Chèze

Abstract

This article aims at characterizing the daily price fundamentals of European Union Allowances (EUAs) traded since 2005 as part of the Emissions Trading Scheme (ETS). First, the presence of two structural changes on April, 2006 following the disclosure of 2005 verified emissions and on October, 2006 following the European Commission announcement of stricter Phase II allocation allow to isolate distinct fundamentals evolving overtime. The results extend previous literature by showing that spot prices react not only to other energy markets and temperatures, but also to economic activity within the main sectors covered by the EU ETS such as proxied by sectoral production indices. Besides, the sub-period decomposition of the pilot phase gives a better grasp of institutional and market events that drive allowance price changes.

Suggested Citation

  • Emilie Alberola & Julien Pierre Chevallier & Benoît Chèze, 2007. "European carbon prices fundamentals in 2005-2007: the effects of energy markets, temperatures and sectorial production," EconomiX Working Papers 2007-33, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2007-33
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Leon Vinokur, 2009. "Disposition in the Carbon Market and Institutional Constraints," Working Papers 652, Queen Mary University of London, School of Economics and Finance.
    2. repec:hum:wpaper:sfb649dp2014-050 is not listed on IDEAS
    3. Benschopa, Thijs & López Cabreraa, Brenda, 2014. "Volatility modelling of CO2 emission allowance spot prices with regime-switching GARCH models," SFB 649 Discussion Papers 2014-050, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    4. repec:hum:wpaper:sfb649dp2017-025 is not listed on IDEAS
    5. Creti, Anna & Jouvet, Pierre-André & Mignon, Valérie, 2012. "Carbon price drivers: Phase I versus Phase II equilibrium?," Energy Economics, Elsevier, vol. 34(1), pages 327-334.
    6. Leon Vinokur, 2009. "Disposition in the Carbon Market and Institutional Constraints," Working Papers 652, Queen Mary University of London, School of Economics and Finance.
    7. Benschop, Thijs & López Cabrera, Brenda, 2017. "Realized volatility of CO2 futures," SFB 649 Discussion Papers 2017-025, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    8. Don BREDIN & Cal MUCKLEY, 2010. "Is There a Stochastic Trend in European Union Emission Trading Scheme Prices?," Sosyoekonomi Journal, Sosyoekonomi Society, issue 2010-EN.
    9. Chan, Ying Tung & Zhao, Hong, 2019. "How do credit market frictions affect carbon cycles? an estimated DSGE model approach," MPRA Paper 106987, University Library of Munich, Germany, revised 05 Dec 2020.
    10. Rotfuß, Waldemar, 2009. "Intraday price formation and volatility in the European Union emissions trading scheme: an introductory analysis," ZEW Discussion Papers 09-018, ZEW - Leibniz Centre for European Economic Research.
    11. Duan, Kun & Ren, Xiaohang & Shi, Yukun & Mishra, Tapas & Yan, Cheng, 2021. "The marginal impacts of energy prices on carbon price variations: Evidence from a quantile-on-quantile approach," Energy Economics, Elsevier, vol. 95(C).

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    More about this item

    Keywords

    Carbon Emissions Trading; Market Price Fundamentals; EU ETS;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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