Profiting from Regulation: An Event Study of the EU Carbon Market
We investigate the effect of cap-and-trade regulation of CO2 on firm profits by performing an event study of a CO2 price crash in the EU market. We examine returns for 90 stocks from carbon intensive industries and 600 stocks in the broad EUROSTOXX index. Firms in carbon intensive, or electricity intensive industries, but not involved in international trade were most hurt by the event. This implies investors were focused on product price impacts, rather than compliance costs. We find evidence that firmsâ€™ net allowance positions also strongly influenced the share price response to the decline in allowance prices.
|Date of creation:||15 Dec 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
- Stephen Ryan, 2006.
"The Costs of Environmental Regulation in a Concentrated Industry,"
2006 Meeting Papers
9, Society for Economic Dynamics.
- Stephen P. Ryan, 2012. "The Costs of Environmental Regulation in a Concentrated Industry," Econometrica, Econometric Society, vol. 80(3), pages 1019-1061, 05.
- Stephen Ryan, 2005. "The Costs of Environmental Regulation in a Concentrated Industry," Working Papers 0510, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Goulder, Lawrence & Bovenberg, A. Lans, 2000.
"Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?,"
dp-00-27, Resources For the Future.
- A. Lans Bovenberg & Lawrence H. Goulder, 2001. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 45-90 National Bureau of Economic Research, Inc.
- A. Lans Bovenberg & Lawrence H. Goulder, 2000. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does it Cost?," NBER Working Papers 7654, National Bureau of Economic Research, Inc.
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2005.
"Markets for Clean Air,"
Cambridge University Press, number 9780521023894.
- Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
- Wayne B Gray & Ronald J Shadbegian, 1997.
"Environmental Regulation, Investment Timing, and Technology Choice,"
97-9, Center for Economic Studies, U.S. Census Bureau.
- Gray, Wayne B & Shadbegian, Ronald J, 1998. "Environmental Regulation, Investment Timing, and Technology Choice," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 235-56, June.
- Wayne B. Gray & Ronald J. Shadbegian, 1997. "Environmental Regulation, Investment Timing, and Technology Choice," NBER Working Papers 6036, National Bureau of Economic Research, Inc.
- List John A. & Millimet Daniel L & McHone Warren, 2004. "The Unintended Disincentive in the Clean Air Act," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-28, February.
- Michael Greenstone, 1998.
"The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufacturers,"
787, Princeton University, Department of Economics, Industrial Relations Section..
- Michael Greenstone, 2002. "The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1175-1219, December.
- Lawrence H. Goulder & Marc A. C. Hafstead & Michael S. Dworsky, 2009. "Impacts of Alternative Emissions Allowance Allocation Methods under a Federal Cap-and-Trade Program," NBER Working Papers 15293, National Bureau of Economic Research, Inc.
- Oberndorfer, Ulrich, 2009. "EU Emission Allowances and the stock market: Evidence from the electricity industry," Ecological Economics, Elsevier, vol. 68(4), pages 1116-1126, February.
- Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006.
"CO 2 cost pass-through and windfall profits in the power sector,"
Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
- Sijm, J. & Neuhoff, K. & Chen, Y., 2006. "CO2 cost pass through and windfall profits in the power sector," Cambridge Working Papers in Economics 0639, Faculty of Economics, University of Cambridge.
- Goulder, Lawrence H. & Hafstead, Marc A.C. & Dworsky, Michael, 2010. "Impacts of alternative emissions allowance allocation methods under a federal cap-and-trade program," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 161-181, November.
- Puller, Steven L., 2006. "The strategic use of innovation to influence regulatory standards," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 690-706, November.
- Michael Dworsky & Lawrence Goulder & Marc Hafstead, 2009. "Impacts of Alternative Emissions Allowance Allocation Methods Under a Federal Cap-and-Trade Program," Discussion Papers 08-048, Stanford Institute for Economic Policy Research.
- Linn, Joshua, 2010. "The effect of cap-and-trade programs on firms' profits: Evidence from the Nitrogen Oxides Budget Trading Program," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 1-14, January.
- John A. List & Daniel L. Millimet & Per G. Fredriksson & W. Warren McHone, 2003. "Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 944-952, November.
- Stefan P. Schleicher & Claudia Kettner & Angela Köppl & Gregor Thenius, 2007. "Stringency and Distribution in the EU Emissions Trading Scheme –The 2005 Evidence," Working Papers 2007.22, Fondazione Eni Enrico Mattei.
- Dallas Burtraw & Karen Palmer, 2008. "Compensation rules for climate policy in the electricity sector," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 819-847.
- Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December.
When requesting a correction, please mention this item's handle: RePEc:isu:genres:32737. 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: (Curtis Balmer)
If references are entirely missing, you can add them using this form.