IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v70y2024ics1544612324012947.html
   My bibliography  Save this article

California carbon allowance futures

Author

Listed:
  • Shi, Shimeng
  • Zhai, Jia

Abstract

Carbon pricing is an important tool to address climate challenge, while limited attention has been given to the U.S. carbon derivatives market, i.e., California carbon allowance (CCA) futures market. To deal with various data frequencies, we use a mixed frequency vector autoregressive model. We find that changes in trading positions of hedgers and speculators can affect the CCA futures returns. Like other commodity futures markets, commercials act as contrarians, while non-commercials behave like momentum traders. We find some evidence of a feedback relationship between the CCA futures market and California's economic condition. The interaction between the energy sector and the carbon futures market is evident. The CCA futures market is more sensitive to climate policy risk than abnormal temperature. Other ETSs’ carbon futures prices and inflation expectation could affect the CCA futures returns on some trading days.

Suggested Citation

  • Shi, Shimeng & Zhai, Jia, 2024. "California carbon allowance futures," Finance Research Letters, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324012947
    DOI: 10.1016/j.frl.2024.106265
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324012947
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.106265?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    California carbon allowance futures; CFTC's trading position; Energy sector; Real economy; Climate change;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324012947. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.