Modeling the price dynamics of CO2 emission allowances

Energy Economics

Volumn 31, Issue 1, 2009, Pages 4-15

  Benz, Eva ^a   Trück, Stefan ^b  

^a UNIVERSITY OF BONN   (Germany)

^b MACQUARIE UNIVERSITY   (Australia)

Author keywords

CO2 emission allowances; Emissions trading; GARCH models; Heteroscedasticity; Regime switching models; Spot price modeling

Indexed keywords

AIR QUALITY; CARBON DIOXIDE; COMMERCE; COSTS; STOCHASTIC MODELS;

CO2 EMISSION ALLOWANCES; EMISSIONS TRADING; GARCH MODELS; HETEROSCEDASTICITY; REGIME-SWITCHING MODELS; SPOT PRICE MODELING;

CARBON MONOXIDE;

CARBON DIOXIDE; CARBON EMISSION; EMISSIONS TRADING; EUROPEAN UNION; MARKOV CHAIN; MODELING; PRICE DYNAMICS; RANDOM WALK METHOD; STOCHASTICITY;

EID: 56949089098     PISSN: 01409883     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.eneco.2008.07.003     Document Type: Article

References (55)

1. Anger N. Emission trading beyond Europe: linking schemes in a Post-Kyoto World. Energy Economics 30 4 (2006) 2028-2049
2. 2 emission allowances trading in Europe - specifying a new class of assets. Problems and Perspectives in Management vol. 3(3) (2006)
3. Bierbrauer M., Trück S., and Weron R. Modeling electricity prices with regime switching models. Lecture Notes on Computer Science vol. 3039 (2004) 859-867
4. BMWT. Turbomaschinen: Wie große Energiemengen auf kleinstem Raum umgewandelt werden. Bundesministerium für Wirtschaft und Technologie (2006) December
5. Böhringer C., and Lange A. Economic implications of alternative allocation schemes for emission allowances. Scandinavian Journal of Economics 107 3 (2005) 563-581
6. Bollerslev T. Generalized autoregressive conditional heteroscedasticity. Journal of Econometrics 31 1 (1986) 34-105
7. Brooks C., Burke S., G., and P. Benchmarks and the accuracy of GARCH model estimation. International Journal of Forecasting 17 (2001) 45-56
8. 2 emission trading program to date. Discussion Paper 95-30-REV (1996)
9. Burtraw D., Palmer K., Bharvirkar R., and Paul A. The effect on asset values of the allocation of carbon dioxide emission allowances. The Electricity Journal 15 5 (2002) 51-62
10. Carlson C., Burtraw D., Cropper M., and Palmer K. Sulfur dioxide control by electric utilities: what are the gains from trade?. Journal of Political Economy 108 (2000) 1292-1326
11. Christoffersen P. Evaluating interval forecasts. International Economic Review 39 4 (1998) 841-862
12. Christoffersen P., and Diebold F. How relevant is volatility forecasting for financial risk management. Review of Economics and Statistics 82 (2000) 12-22
13. Commision of the European Communities. Proposal for a Directive of the European Parliament and of the Council Establishing a Framework for Greenhouse Gas Emissions Trading within the European Community and Amending Council Decision 96/61/EC (2001)
14. Crnkovic C., and Drachman J. A universal tool to discriminate among risk measurement techniques. Risk 9 (1996) 138-143
15. 2 emission allowance prices and derivatives: evidence from the EEX. ERIM Report Series ERS-2005-052-F&A (2005)
16. Dempster A., Laird N., and Rubin D. Maximum likelihood from incomplete data via the EM algorithm. Journal of the Royal Statistical Society 39 (1977) 1-38
17. Diebold F., Gunther T., and Tay A. Evaluating density forecasts with applications to financial risk management. International Economic Review 39 (1998) 863-883
18. Duan J.-C. The GARCH option pricing model. Mathematical Finance 5 (1995)
19. Ellerman A., and Montero J.-P. The declining trend in sulfur dioxide emissions: implications for allowance prices. Journal of Environmental Economics and Management 36 (1998) 26-45
20. Engle R. Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation. Econometrica 50 (1982) 987-1007
21. Ethier, R., Mount, T., 1998. Estimating the volatility of spot prices in restructured electricity markets and the implications for option values. Working paper, Cornell University.
22. European Union, 2003. Directive establishing a scheme for greenhouse gas emission allowance trading within the community and amending council directive 96/61/ec. European Commission.
23. Fichtner, W., 2005. Emissionsrechte, Energie und Produktion. Erich Schmidt Verlag.
24. Franses P., and van Dijk D. Non-Linear Time Series Models in Empirical Finance (2000), Cambridge University Press
25. Garcia R., Contreras J., van Akkeren M., and Garcia J. A GARCH forecasting model to predict day-ahead electricity prices. IEEE Transactions on Power Systems 20 2 (2005) 867-874
26. Goldfeld S., and Quandt R. A Markov model for switching regressions. Journal of Econometrics 1 (1973) 3-16
27. Hamilton J. A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica 57 (1989) 357-384
28. Hamilton J. Analysis of time series subject to changes in regime. Journal of Econometrics 45 (1990) 39-70
29. Hamilton J. Time Series Analysis (1994), Princeton University Press
30. Huisman R., and De Jong C. Option formulas for mean-reverting power prices with spikes. Energy Power Risk Management 7 (2003) 12-16
31. Huisman R., and Mahieu R. Regime jumps in electricity prices. Working paper (2001), Rotterdam School of Management
32. IETA, May 2005. International emissions trading association: state and trends of the carbon market.
33. Kanas A. Nonlinear forecasts of stock returns. Journal of Forecasting 22 4 (2003) 299-316
34. Kim C.-J., and Nelson C. State-Space Models with Regime-Switching: Classical and Gibbs-Sampling Approaches with Applications (1999), MIT Press, Cambridge
35. Kim C.-J., Piger J.M., and Startz R. Estimation of Markov regimes witching regression models with endogenous switching. Working papers 2003-015 (2004), Federal Reserve Bank of St. Louis
36. Kosobud R., Stokes H., Tallarico C., and Scott B. Valuing tradable private rights to pollute the public's air. Review of Accounting and Finance 4 (2005) 50-71
37. Morana C. A semiparametric approach to short-term oil price forecasting. Energy Economics 23 3 (2001) 325-338
38. Mugele C., Rachev S., and Trück S. Stable modeling of different European power markets. Investment Management and Financial Innovations 2 3 (2005)
39. Pagan A.R. The econometrics of financial markets. Journal of Empirical Finance 3 (1996) 15-102
40. Paolella, M., Taschini, L., 2006. An econometric analysis of emission trading allowances. Working Paper, Swiss Banking Institute.
41. PointCarbon, 2004. Special issues - what determines the price of carbon. Carbon Market Analyst.
42. PointCarbon. Carbon market daily: steel companies hesistant to offload EUA (2005). http://www.pointcarbon.de 08.07.2005
43. Ramirez O., and Fadiga M. Forecasting agricultural commodity prices with asymmetric error GARCH models. Journal of Agricultural and Resource Economics 8 (2003)
44. Rezek J. Shadow prices of sulfur dioxide allowances in Phase I electric utilities. annual meeting of the American Agricultural Economics Association (1999)
45. Rosenblatt M. Remarks on a multivariate transformation. Annals of Mathematical Statistics 23 (1952) 470-472
46. Schaller H., and van Norden S. Regime switching in stock market returns. Applied Financial Economics, Taylor and Francis Journals 7 2 (1997) 177-191
47. Schennach S. The economics of pollution permit banking in the context of Title IV of the 1990 Clean Air Act amendment. Journal of Environmental Economics and Management 40 (2000) 189-210
48. Schleich J., Ehrhart K.-M., Hoppe C., and Seifert S. Banning banking in EU emissions trading?. Energy Policy 34 1 (2006) 112-120
49. Schwartz E. The stochastic behavior of commodity prices: implications for valuation and hedging. The Journal of Finance 52 (1997) 923-973
50. Seifert J., Uhrig-Homburg M., and Wagner M. Dynamic behavior of CO2 spot prices. Journal of Environmental Economics and Management 56 2 (2008) 180-194
51. Spectron, 2005. http://www.energie.de (26.06.2005).
52. Taylor S. Modelling Financial Time Series. (1986), Wiley, New Nork
53. 2 emission certificates. Working Paper, University of Karlsruhe.
54. Ulreich S. Der Emissionshandel in der EU-25: Erste Erfahrungen mit einem neuen Instrument. Zeitschrift für Energiewirtschaft 29 (2005) 279-288
55. Weron R., Bierbrauer M., and Trück S. Modeling electricity prices: jump diffusion and regime switching. Physica A 336 (2004) 39-48