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Electricity, carbon and weather in France: where do we stand ?

Author

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  • Sophie Chemarin

    () (Department of Economics, Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

  • Andreas Heinen

    (Departamento de Estadistica y Econometria - Universidad Carlos III , Madrid, Spain)

  • Eric Strobl

    (Department of Economics, Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

Abstract

As a tool to fight long run changes in climate the European Union explicitly introduced the emission trading scheme (EU ETS) on January 1, 2005, which aimed at reducing carbon emission by 8% by 2012, and was designed to operate in two phases. Using data related to the first phase, this article investigates the role that the EU ETS plays in the power generation market by taking into account the existence of possible cross-spillovers between the French carbon and the French electricity spot markets, the spot prices of natural gas and of oil, and climatic conditions in France and elsewhere. Results show that there is no short run relationship between the electricity and carbon returns, while there is a long run relationship. However, this relationship suffers from a disequilibrium in that the electricity price readjust in the long run. We also find that while there are own mean and own volatility spillovers in the two markets, there are no cross own mean and own volatility spillovers, indicating that the electricity spot market and the carbon spot market are not integrated. Finally, results underline the limited impact of weather on the interconnection of these markets.

Suggested Citation

  • Sophie Chemarin & Andreas Heinen & Eric Strobl, 2008. "Electricity, carbon and weather in France: where do we stand ?," Working Papers hal-00340171, HAL.
  • Handle: RePEc:hal:wpaper:hal-00340171
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00340171
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    References listed on IDEAS

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    Cited by:

    1. M. Cummins, 2013. "Multiple comparisons problem: Recent advances applied to energy and emissions," Applied Economics Letters, Taylor & Francis Journals, vol. 20(9), pages 903-909, June.
    2. Fatemeh Nazifi, 2016. "The pass-through rates of carbon costs on to electricity prices within the Australian National Electricity Market," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(1), pages 41-62, January.
    3. Moutinho, Victor & Vieira, Joel & Carrizo Moreira, António, 2011. "The crucial relationship among energy commodity prices: Evidence from the Spanish electricity market," Energy Policy, Elsevier, vol. 39(10), pages 5898-5908, October.
    4. Fatemeh Nazifi, 2016. "The pass-through rates of carbon costs on to electricity prices within the Australian National Electricity Market," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(1), pages 41-62, January.
    5. Freitas, Carlos J. Pereira & Silva, Patrícia Pereira da, 2015. "European Union emissions trading scheme impact on the Spanish electricity price during phase II and phase III implementation," Utilities Policy, Elsevier, vol. 33(C), pages 54-62.

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