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Carbon Price Dynamics – Evidence from Phase II of the European Emission Trading Scheme

  • Wilfried Rickels
  • Dennis Görlich
  • Gerrit Oberst
  • Sonja Peterson

In this paper we empirically investigate potential determinants of allowance (EUA) price dynamics in the European Union Emission Trading Scheme (EU ETS) during Phase II. In contrast to previous papers, we analyze a significantly longer time series, place particular emphasis on the importance of price variable selection, and include an extensive data of renewable energy feed-in in Europe. We show (i) that results are extremely sensitive to choosing different price series of potential determinants, such as coal and gas prices, (ii) that EUA price dynamics are only marginally influenced by renewable energy provision in Europe, and iii) that EUA prices currently do not reflect marginal abatement costs across Europe. We conclude that the expectation of a more mature allowance market in Phase II cannot be confirmed

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File URL: https://www.ifw-members.ifw-kiel.de/publications/carbon-price-dynamics-2013-evidence-from-phase-ii-of-the-european-emission-trading-scheme/KWP_1804.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1804.

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Length: 40 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:kie:kieliw:1804
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  1. Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2010. "The Environment and Directed Technical Change," Seminar Papers 762, Stockholm University, Institute for International Economic Studies.
  2. Zaklan, Aleksandar & Cullmann, Astrid & Neumann, Anne & von Hirschhausen, Christian, 2012. "The globalization of steam coal markets and the role of logistics: An empirical analysis," Energy Economics, Elsevier, vol. 34(1), pages 105-116.
  3. Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2012. "Modeling and explaining the dynamics of European Union Allowance prices at high-frequency," Energy Economics, Elsevier, vol. 34(1), pages 316-326.
  4. Seifert, Jan & Uhrig-Homburg, Marliese & Wagner, Michael, 2008. "Dynamic behavior of CO2 spot prices," Journal of Environmental Economics and Management, Elsevier, vol. 56(2), pages 180-194, September.
  5. Emilie Alberola & Julien Pierre Chevallier, 2007. "European carbon prices and banking restrictions: evidence from phase I (2005-2007)," EconomiX Working Papers 2007-32, University of Paris West - Nanterre la Défense, EconomiX.
  6. Chevallier, Julien, 2011. "A model of carbon price interactions with macroeconomic and energy dynamics," Energy Economics, Elsevier, vol. 33(6), pages 1295-1312.
  7. Alberola, Emilie & Chevallier, Julien & Cheze, Benoi^t, 2008. "Price drivers and structural breaks in European carbon prices 2005-2007," Energy Policy, Elsevier, vol. 36(2), pages 787-797, February.
  8. Raymond Li & Roselyne Joyeux & Ronald D. Ripple, 2010. "International Steam Coal Market Integration," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 181-202.
  9. Chevallier, Julien, 2011. "Detecting instability in the volatility of carbon prices," Economics Papers from University Paris Dauphine 123456789/5110, Paris Dauphine University.
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