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

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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
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    File URL: http://www-sekon.slu.se/~gbost/CERE_WP2012-9.pdf
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    References listed on IDEAS

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    1. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
    2. Lata Gangadharan, 2000. "Transaction Costs in Pollution Markets: An Empirical Study," Land Economics, University of Wisconsin Press, vol. 76(4), pages 601-614.
    3. Cason, Timothy N & Gangadharan, Lata, 2003. "Transactions Costs in Tradable Permit Markets: An Experimental Study of Pollution Market Designs," Journal of Regulatory Economics, Springer, pages 145-165.
    4. 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).
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    Cited by:

    1. Andreas Karpf & Antoine Mandel & Stefano Battiston, 2017. "Price and Network Dynamics in the European Carbon Market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01484117, HAL.
    2. 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.
    3. Pablo Pintos & Pedro Linares, 2016. "Assessing the EU ETS with an Integrated Model," Working Papers 01-2016, Economics for Energy.
    4. Hennighausen, Tanja, 2015. "Exposure to television and individual beliefs: Evidence from a natural experiment," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 956-980.
    5. Naegele, Helene, 2015. "Offset Credits in the EU Emissions Trading System : A Firm-Level Evaluation of Transaction Costs," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112817, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    emission trading; Europe; firm level data; transaction costs;

    JEL classification:

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

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