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Corporate Emissions-Trading Behaviour During the First Decade of the EU ETS

Author

Listed:
  • Jan Abrell

    (ZEW-Leibniz Centre for European Economic Research)

  • Johanna Cludius

    (Oeko-Institut)

  • Sascha Lehmann

    (Fraunhofer Institute for Systems and Innovation Research)

  • Joachim Schleich

    (Fraunhofer Institute for Systems and Innovation Research
    Grenoble Ecole de Management
    Virginia Tech University)

  • Regina Betz

    (Zurich University of Applied Sciences)

Abstract

This study analyses factors related to allowance-trading behaviour for the first ten years of the existence of the European Union Emissions Trading System (EU ETS). Our empirical analysis employs a dataset that combines information on trading activities for more than 6000 companies with company characteristics. Indicators of trading activity include the volume and the number of transactions as well as the usage of intermediaries and of derivatives markets. For 2005–2014 and for the individual trading periods, we find that trading behaviour is related to the size of a company, its net position (the difference between free allocations and verified emissions), its sector affiliation, productivity, and location. We also find evidence that trading-related transaction costs affect trading activity in the EU ETS in all trading periods. Our results further suggest that net buyers (companies whose verified emissions exceed free allocations in a given year) are more likely to participate in emissions trading and to trade at higher volumes than net sellers are. We explain this asymmetry in behaviour—which might lead to a violation of Coase’s independence property—by potential asymmetries in the actual or perceived opportunity costs of holding allowances between net sellers and net buyers.

Suggested Citation

  • Jan Abrell & Johanna Cludius & Sascha Lehmann & Joachim Schleich & Regina Betz, 2022. "Corporate Emissions-Trading Behaviour During the First Decade of the EU ETS," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(1), pages 47-83, September.
    • Handle: RePEc:kap:enreec:v:83:y:2022:i:1:d:10.1007_s10640-021-00593-7
    DOI: 10.1007/s10640-021-00593-7
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    References listed on IDEAS

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    Cited by:

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    3. Kyle S. Herman, 2024. "Intermediaries and complexity: assessing emissions-based governance in the European Union’s EU-ETS," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 24(4), pages 539-564, December.
    4. Flori, Andrea & Borghesi, Simone & Marin, Giovanni, 2024. "The environmental-financial performance nexus of EU ETS firms: A quantile regression approach," Energy Economics, Elsevier, vol. 131(C).

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