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EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry

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  • Oberndorfer, Ulrich

Abstract

This paper constitutes – to our best knowledge – the first econometric analysis on stock market effects of the EU Emission Trading Scheme (EU ETS). Our results suggest that EU Emission Allowance (EUA) price developments matter to the stock performance of electricity firms: EUA price changes and stock returns of the most important European electricity corporations are shown to be positively related. This effect does not work asymmetrically, so that stock markets do not seem to react differently to EUA appreciations in comparison to depreciations. The carbon market effect is shown to be both time- and countryspecific: It is particularly strong for the period of EUA market shock in early 2006, and differs with respect to the countries where the electricity corporations analysed are headquartered. Stock market reactions to EUA volatility could not be shown.

Suggested Citation

  • Oberndorfer, Ulrich, 2008. "EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry," ZEW Discussion Papers 08-059, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:7382
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    File URL: https://www.econstor.eu/bitstream/10419/24755/1/dp08059.pdf
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    Citations

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    Cited by:

    1. Mohamed Amine Boutaba, 2009. "Dynamic linkages among European carbon markets," Economics Bulletin, AccessEcon, vol. 29(2), pages 499-511.
    2. Muñoz, M. Pilar & Dickey, David A., 2009. "Are electricity prices affected by the US dollar to Euro exchange rate? The Spanish case," Energy Economics, Elsevier, vol. 31(6), pages 857-866, November.

    More about this item

    Keywords

    EU ETS; electricity stocks; asset pricing;

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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