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Carbon Emissions and Brazilian Ethanol Prices: Are They Correlated? An Econophysics Study

Author

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  • Derick David Quintino

    (Department of Economics, Administration and Sociology, Luiz de Queiroz—College of Agriculture, University of São Paulo, Piracicaba 13418-900, SP, Brazil)

  • Heloisa Lee Burnquist

    (Department of Economics, Administration and Sociology, Luiz de Queiroz—College of Agriculture, University of São Paulo, Piracicaba 13418-900, SP, Brazil)

  • Paulo Jorge Silveira Ferreira

    (VALORIZA—Research Center for Endogenous Resource Valorization, 7300-555 Portalegre, Portugal
    Instituto Politécnico de Portalegre, 7300-110 Portalegre, Portugal
    CEFAGE-UE, IIFA, Universidade de Évora, Largo dos Colegiais 2, 7004-516 Évora, Portugal)

Abstract

Brazil is one of the largest global producers and exporters of ethanol and in 2017 launched RenovaBio, a programme aiming to mitigate greenhouse gas emissions. In parallel to this domestic scenario, there is rapid growth in the world market of carbon production, as well as complex price relations between fossil and renewable energies becoming increasingly important in recent years. The present work aims to contribute to filling a gap in knowledge about the relationship between Brazilian ethanol and other relevant energy-related commodities. We use a recent methodology (Detrended Cross-Correlation Approach—DCCA—with sliding windows) to analyze dynamically the cross-correlation levels between Brazilian ethanol prices and carbon emissions, as well as other possible-related prices, namely: sugar, Brent oil, and natural gas prices, with a sample of daily prices between January 2010 and July 2020. Our results indicate that (i) in the whole period, Brazilian ethanol has significant correlations with sugar, moderate correlation with oil in the short term, and only a weak, short-term correlation with carbon emission prices; (ii) with a sliding windows approach, the strength of the correlation between ethanol and carbon emissions varies between weak and non-significant in the short term.

Suggested Citation

  • Derick David Quintino & Heloisa Lee Burnquist & Paulo Jorge Silveira Ferreira, 2021. "Carbon Emissions and Brazilian Ethanol Prices: Are They Correlated? An Econophysics Study," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:22:p:12862-:d:684107
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