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Permit price dynamics in the U.S. SO 2 trading program: A cointegration approach

Author

Listed:
  • Mohamed Amine Boutabba

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • Olivier Beaumais
  • Sandrine Lardic

Abstract

The aim of this paper is to study empirically the determination and the dynamic behavior of the SO 2 permit prices. Previous research focused on ex-post market price analysis without taking weather conditions into account. Therefore, this study attempts to fill a gap in the literature by providing new empirical evidence on the SO 2 price evolution and its interactions with macroeconomic variables, microeconomic variables and climate variables. Using monthly data from January 1995 to December 2006, our estimation results indicate the existence of a long-term relationship between SO 2 permit price, scrubbing costs, industrial production, and weather conditions. In the short run, SO 2 permit price is affected by scrubbing costs, energy prices, and weather conditions. Policy makers and private investors could benefit from the findings of this study that provides useful information on the characteristics of the SO 2 market and may plan their strategy. © 2011 Elsevier B.V.

Suggested Citation

  • Mohamed Amine Boutabba & Olivier Beaumais & Sandrine Lardic, 2012. "Permit price dynamics in the U.S. SO 2 trading program: A cointegration approach," Post-Print hal-02877974, HAL.
    • Handle: RePEc:hal:journl:hal-02877974
    DOI: 10.1016/j.eneco.2011.04.004
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    Cited by:

    1. Evangelina Dardati & Julio Riutort, 2016. "Cap-and-Trade and Financial Constraints: Is Investment Independent of Permit Holdings?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(4), pages 841-864, December.

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    Keywords

    Price fundamentals; SO 2 emission permits;

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