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The use of derivatives on CO2-emission allowances in Italy

Author

Listed:
  • Michele Leonardo Bianchi

    (Bank of Italy)

  • Maurizio Magnani

    (Bank of Italy)

  • Francesco Vercelli

    (Bank of Italy)

Abstract

In this paper, we study the Italian market for CO2-emission allowances derivatives. The first part of the study illustrates the main characteristics of these instruments, the peculiarities of the market, and their use for risk hedging and investment purposes. The second part describes the development of CO2-emission derivatives in Italy since 2021, exploring the EMIR database, which collects daily observations of transactions in derivatives. The evolution of the market is analysed in terms of notional values, its concentration and the interactions between the main players. Finally, we conduct a deep-dive analysis of the characteristics, price dynamics and term structure of CO2-emission futures.

Suggested Citation

  • Michele Leonardo Bianchi & Maurizio Magnani & Francesco Vercelli, 2024. "The use of derivatives on CO2-emission allowances in Italy," Questioni di Economia e Finanza (Occasional Papers) 896, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_896_24
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2024-0896/QEF_896_24.pdf
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    References listed on IDEAS

    as
    1. René Carmona & Juri Hinz, 2011. "Risk-Neutral Models for Emission Allowance Prices and Option Valuation," Management Science, INFORMS, vol. 57(8), pages 1453-1468, August.
    2. Daskalakis, George & Psychoyios, Dimitris & Markellos, Raphael N., 2009. "Modeling CO2 emission allowance prices and derivatives: Evidence from the European trading scheme," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1230-1241, July.
    3. Julien Chevallier & Benoît Sévi, 2014. "On the Stochastic Properties of Carbon Futures Prices," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 127-153, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    CO2-emission allowances; CO2-emission derivatives; granular data; EMIR;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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    Access and download statistics

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