Price determination in the EU ETS market: Theory and econometric analysis with market fundamentals

Energy Economics

Volumn 36, Issue , 2013, Pages 380-395

  Aatola, Piia ^a   Ollikainen, Markku ^b   Toppinen, Anne ^b  

^a Valtion taloudellinen tutkimuskeskus Finland   (Finland)

^b UNIVERSITY OF HELSINKI   (Finland)

Author keywords

Econometric analysis; European Union emissions trading; Permit price; Risk

Indexed keywords

DEPENDENT VARIABLES; ECONOMETRIC ANALYSIS; ECONOMETRIC MODEL; ELECTRICITY PRICES; EMISSION ALLOWANCES; EMISSIONS TRADING; EMPIRICAL DATA; EUROPEAN UNION; EUROPEAN UNION EMISSIONS TRADING SCHEMES; EXOGENOUS VARIABLES; FORWARD MARKET; FORWARD PRICE; MARKET MODEL; PERMIT PRICE; PRICE DETERMINATION; STATIONARY TIME SERIES;

COSTS; GAS EMISSIONS; INDUSTRY; INTERNATIONAL LAW; RISKS;

COMMERCE;

ECONOMETRICS; ELECTRICITY GENERATION; EMISSIONS TRADING; ENERGY MARKET; EUROPEAN UNION; MODELING; PRICE DETERMINATION; PRICE DYNAMICS; TIME SERIES ANALYSIS;

GERMANY;

EID: 84874339302     PISSN: 01409883     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.eneco.2012.09.009     Document Type: Article

References (46)

1. Alberola E., Chevallier J., Cheze B. Price drivers and structural breaks in European carbon prices 2005-2007. Energy Pol. 2008, 36:787-797.
2. Anderson B., Maria C. Abatement and allocation in the pilot phase of the EU ETS. Environ. Resour. Econ. 2011, 48:83-103.
3. Arrow K.J. Essays on the Theory of Risk Bearing 1974, North Holland, Amsterdam.
4. Baldursson F., von der Fehr N.-H. Price volatility and risk exposure: on market based environmental instruments. J. Environ. Econ. Manag. 2004, 48:682-704.
5. 2 emission allowances. Energy Econ. 2009, 31:4-15.
6. Bollerslev T. Generalized autoregressive conditional heteroskedasticity. J. Econ. 1986, 31:307-327.
7. Bredin D., Muckley C. An emerging equilibrium in the EU emissions trading scheme. Energy Econ. 2011, 33:353-362.
8. Chevallier J. Carbon futures and macroeconomic risk factors: a view from the EU ETS. Energy Econ. 2009, 31:614-625.
9. Chevallier J. Econometrics of carbon markets. The European Union Emissions Trading Scheme and the Clean Development Mechanism 2012, Springer.
10. Christiansen A.C., Arvanitakis A., Tangen K., Hasselknippe H. Price determinants in the EU emissions trading scheme. Clim. Pol. 2005, 5:15-30.
11. Creti A., Jouvet P.-A., Mignon V. Carbon price drivers: phase I versus phase II equilibrium?. Energy Econ. 2012, 34:327-334.
12. Daskalakis G., Markellos R. Are electricity risk Premia affected by emission allowance prices? Evidence from the EEX, Nord Pool and Powernext. Energy Pol. 2009, 37:2594-2604.
13. 2 emission allowance prices and derivatives: evidence from the European trading scheme. J. Bank. Financ. 2009, 33:1230-1241.
14. Davis L.W., Kilian L. Estimating the effect of a gasoline tax on carbon emissions. J. Appl. Econ. 2011, 26:1187-1214.
15. Delarue E.D., D'haeseleer W.D. Price determination of ETS allowances through the switching level of coal and gas in the power sector. Int. J. Energy Res. 2007, 31:1001-1015.
16. Delarue E., Voorspools K., D'haeseleer W. Fuel switching in the electricity sector under the EU ETS: review and prospective. J. Energy Eng. 2008, 134:40-46.
17. 2 Abatement in the European Power Sector. Working Papers 2008, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
18. Delarue E., Ellerman A.D., D'haeseleer W. Robust MACCs? The topography of abatement by fuel switching in the European power sector. Energy 2010, 35:1465-1475.
19. Egenhofer C., et al. The EU emissions trading system and climate policy towards 2050: real incentives to reduce emissions and drive innovation?. CEPS Special Report 2011, CEPS, Brussels.
20. Ellerman A.D., Buchner B. Over allocation or abatement? A preliminary analysis of the 2005-2006 emissions data. Environ. Resour. Econ. 2008, 41:267-287.
21. Engle R. Autoregressive conditional heteroscedasticity with estimates of variance of United Kingdom inflation. Econometrica 1982, 50:987-1008.
22. Falbo P., Felletti D., Stefani S. Free EUAs and fuel switching. Energy Econ. 2012, 34:1064-1073.
23. Fezzi C., Bunn D.W. Interaction of European carbon trading and energy prices. J. Environ. Manage. 2009, 2:53-69.
24. Gollier C. The Economics of Risk and Time 2001, The MIT Press, Cambridge.
25. The Foundations of Econometric Analysis 1995, Cambridge University Press, Cambridge. D.F. Hendry, M.S. Morgan (Eds.).
26. Hintermann B. Allowance price drivers in the first phase of the EU ETS. J. Environ. Econ. Manag. 2010, 59:43-56.
27. Holthausen D. Hedging and the competitive firm under price uncertainty. Am. Econ. Rev. 1979, 69:989-995.
28. Jaraite J., Convery F., Di Maria C. Assessing the transaction costs of firms in the EU ETS: lessons from Ireland. Clim. Pol. 2010, 10:190-215.
29. Keppler J., Cruciani M. Rents in the European power sector due to carbon trading. Energy Pol. 2010, 38:280-4290.
30. 2, electricity, and other energy variables during phase I and phase II of the EU ETS. Energy Pol. 2010, 38:3329-3341.
31. 2 abatement opportunity in the UK through fuel-switching under the EU ETS (2005-2008): evidence from the E-Simulate model. Int. J. Glob. Energy 2012, 35.
32. 2 prices, energy and weather. Energy J. 2007, 28(3):73-93.
33. Mansanet-Bataller M., Chevallier J., Hervé-Mignuccic M., Alberola E. EUA and sCER phase II price drivers: unveiling the reasons for the existence of the EUA-sCER spread. Energy Pol. 2011, 39:1056-1069.
34. Paolella M., Taschini L. An econometric analysis of emissions trading allowances. J. Bank. Financ. 2008, 32:2022-2032.
35. Pesaran H., Shin Y. Generalized impulse response analysis in linear multivariate models. Econ. Lett. 1998, 58:17-29.
36. Pettersson F., Söderholm P., Lundmark R. Fuel switching and climate and energy policies in the European power generation sector: a generalized Leontief model. Energy Econ. 2013, 35:14-21.
37. Rickels W., Duscha V., Keller A., Peterson S. The determinants of allowance prices in the European emissions trading scheme - can we expect an efficient allowance market 2008?. Kiel Working Papers, No. 1387 2007, Kiel.
38. Rickels W., Görlich D., Oberst G. Explaining European emission allowance price dynamics: evidence from phase II. Kiel Working Papers, No. 1650 2010.
39. 2 spot prices. J. Environ. Econ. Manag. 2008, 56:180-194.
40. 2 cost pass-through and windfall profits in the power sector. Clim. Pol. 2006, 6:47-70.
41. Sims A. Macroeconomics and reality. Econometrica 1980, 40:1-48.
42. State and Trends of Carbon Market 2010 2011, World Bank, Available: http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/StateAndTrend_LowRes.pdf.
43. Stock James H., Yugo Testing for weak instruments in linear IV regression. Cambridge, MA: NBER Technical Working Paper 284 2002.
44. Stock J.H., Wright J.H., Yugo M. A survey of weak instruments and weak identification in generalized method of moments. J. Bus. Econ. Stat. 2002, 20:518-529.
45. ThomsonReuters 3000Xtra hosted terminal access URL. http://portal.hpd.global.reuters.com.
46. Xepapadeas A. Advanced principles in environmental economics 1997, Edvar Elgar.