IDEAS home Printed from https://ideas.repec.org/p/hhs/slucer/2012_009.html
   My bibliography  Save this paper

Firm Trading Behaviour and Transaction Costs in the European Union’s Emission Trading System: An Empirical Assessment

Author

Listed:

Abstract

To the best of our knowledge, this study is one of the first to empirically analyse the trading behaviour of all ETS firms during the first phase of the EU’s Emissions Trading System. We use a unique dataset which allows investigating the importance of permit trading transaction costs, such as information costs and search costs. This paper shows that transaction costs can play an important role in the initial years of the programme. These costs are significant in explaining why a number of ETS firms did not sell their unused allowances on the market. This study also supports the concerns that transaction costs might be excessive for smaller participants.

Suggested Citation

  • Jaraite, Jurate & Kažukauskas, Andrius, 2012. "Firm Trading Behaviour and Transaction Costs in the European Union’s Emission Trading System: An Empirical Assessment," CERE Working Papers 2012:9, CERE - the Center for Environmental and Resource Economics.
  • Handle: RePEc:hhs:slucer:2012_009
    as

    Download full text from publisher

    File URL: http://www-sekon.slu.se/~gbost/CERE_WP2012-9.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cason, Timothy N & Gangadharan, Lata, 2003. "Transactions Costs in Tradable Permit Markets: An Experimental Study of Pollution Market Designs," Journal of Regulatory Economics, Springer, vol. 23(2), pages 145-165, March.
    2. A. Denny Ellerman and Raphael Trotignon, 2009. "Cross Border Trading and Borrowing in the EU ETS," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    3. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
    4. Lata Gangadharan, 2000. "Transaction Costs in Pollution Markets: An Empirical Study," Land Economics, University of Wisconsin Press, vol. 76(4), pages 601-614.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Karpf, Andreas & Mandel, Antoine & Battiston, Stefano, 2018. "Price and network dynamics in the European carbon market," Journal of Economic Behavior & Organization, Elsevier, vol. 153(C), pages 103-122.
    2. Benoît Chèze, Julien Chevallier, Nicolas Berghmans, and Emilie Alberola, 2020. "On the CO2 Emissions Determinants During the EU ETS Phases I and II: A Plant-level Analysis Merging the EUTL and Platts Power Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 153-184.
    3. Aleksandar Zaklan, 2013. "Why Do Emitters Trade Carbon Permits?: Firm-Level Evidence from the European Emission Trading Scheme," Discussion Papers of DIW Berlin 1275, DIW Berlin, German Institute for Economic Research.
    4. Pablo Pintos & Pedro Linares, 2016. "Assessing the EU ETS with an Integrated Model," Working Papers 01-2016, Economics for Energy.
    5. Heindl, Peter & Lutz, Benjamin, 2012. "Carbon management: Evidence from case studies of German firms under the EU ETS," ZEW Discussion Papers 12-079, ZEW - Leibniz Centre for European Economic Research.
    6. Naegele, Helene, 2015. "Offset Credits in the EU Emissions Trading System : A Firm-Level Evaluation of Transaction Costs," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112817, Verein für Socialpolitik / German Economic Association.
    7. Balietti, Anca Claudia, 2016. "Trader types and volatility of emission allowance prices. Evidence from EU ETS Phase I," Energy Policy, Elsevier, vol. 98(C), pages 607-620.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baudry, Marc & Faure, Anouk & Quemin, Simon, 2021. "Emissions trading with transaction costs," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    2. Jūratė Jaraitė-Kažukauskė & Andrius Kažukauskas, 2015. "Do Transaction Costs Influence Firm Trading Behaviour in the European Emissions Trading System?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(3), pages 583-613, November.
    3. Rajesh Singh & Quinn Weninger, 2017. "Cap-and-trade under transactions costs and factor irreversibility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(2), pages 357-407, August.
    4. Robert W. Hahn & Robert N. Stavins, 2011. "The Effect of Allowance Allocations on Cap-and-Trade System Performance," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 267-294.
    5. He, Fang & Yin, Yafeng & Shirmohammadi, Nima & Nie, Yu (Marco), 2013. "Tradable credit schemes on networks with mixed equilibrium behaviors," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 47-65.
    6. Christos Constantatos & Eleftherios Filippiadis & Eftichios Sartzetakis, 2014. "Using the allocation of emission permits for strategic trade purposes," Journal of Regulatory Economics, Springer, vol. 45(3), pages 259-280, June.
    7. Donald Larson & Gunnar Breustedt, 2009. "Will Markets Direct Investments Under the Kyoto Protocol? Lessons from the Activities Implemented Jointly Pilots," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 433-456, July.
    8. Färe, Rolf & Grosskopf, Shawna & Pasurka,, Carl A., 2013. "Tradable permits and unrealized gains from trade," Energy Economics, Elsevier, vol. 40(C), pages 416-424.
    9. Cason, Timothy N. & Gangadharan, Lata, 2011. "Price discovery and intermediation in linked emissions trading markets: A laboratory study," Ecological Economics, Elsevier, vol. 70(7), pages 1424-1433, May.
    10. Coria, Jessica & Löfgren, Åsa & Sterner, Thomas, 2009. "To Trade or Not to Trade: Firm-Level Analysis of Emissions Trading in Santiago, Chile," Discussion Papers dp-09-25-efd, Resources For the Future.
    11. Fowlie, Meredith & Perloff, Jeffrey M., 2004. "The Effect of Pollution Permit Allocations on Firm-Level Emissions," CUDARE Working Papers 25116, University of California, Berkeley, Department of Agricultural and Resource Economics.
    12. John Stranlund & Wei Zhang, 2008. "Bankruptcy risk and the performance of tradable permit markets," Economics Bulletin, AccessEcon, vol. 17(9), pages 1-9.
    13. Kailin Kroetz & James N. Sanchirico & Daniel K. Lew, 2015. "Efficiency Costs of Social Objectives in Tradable Permit Programs," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 339-366.
    14. Heindl, Peter, 2012. "Transaction costs and tradable permits: Empirical evidence from the EU emissions trading scheme," ZEW Discussion Papers 12-021, ZEW - Leibniz Centre for European Economic Research.
    15. Remes, Piia, 2013. "Putting a Price on Carbon – Econometric Essays on the European Union Emissions Trading Scheme and its Impacts," Research Reports 62, VATT Institute for Economic Research.
    16. Meredith Fowlie & Jeffrey M. Perloff, 2013. "Distributing Pollution Rights in Cap-and-Trade Programs: Are Outcomes Independent of Allocation?," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1640-1652, December.
    17. Larson, Donald F. & Breustedt, Gunnar, 2007. "Will markets direct investments under the Kyoto Protocol ?," Policy Research Working Paper Series 4131, The World Bank.
    18. Schleich, Joachim & Lehmann, Sascha & Cludius, Johanna & Abrell, Jan & Betz, Regina Annette & Pinkse, Jonatan, 2020. "Active or passive? Companies' use of the EU ETS," Working Papers "Sustainability and Innovation" S07/2020, Fraunhofer Institute for Systems and Innovation Research (ISI).
    19. Edward B. Barbier, 2013. "Is a global crisis required to prevent climate change? A historical–institutional perspective," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 28, pages 598-614, Edward Elgar Publishing.
    20. Raphaël Trotignon & Pierre-André Jouvet & Boris Solier & Simon Quemin & Jérémy Elbeze, 2015. "European carbon market: lessons on the impact of a market stability reserve using the Zephyr model," Working Papers 1511, Chaire Economie du climat.

    More about this item

    Keywords

    emission trading; Europe; firm level data; transaction costs;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:slucer:2012_009. 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: . General contact details of provider: http://www.cere.se .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mona Bonta Bergman (email available below). General contact details of provider: http://www.cere.se .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.