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London vs. Leipzig: Price Discovery of Carbon Futures during Phase III of the ETS

Author

Listed:
  • Martin Stefan
  • Claudia Wellenreuther

Abstract

Futures for European carbon emission allowances resemble a relatively new class of financial assets that are currently traded on two exchanges: the ICE in London and the EEX in Leipzig. While the former features greater trading volumes, the latter hosts the majority of the primary auctions of ETS emission allowances. This letter, therefore, investigates which of these trading places dominates the carbon price discovery process. The results of various price discovery measures based on a vector error correction model indicate that the ICE leads the price discovery process of carbon futures.

Suggested Citation

  • Martin Stefan & Claudia Wellenreuther, 2019. "London vs. Leipzig: Price Discovery of Carbon Futures during Phase III of the ETS," CQE Working Papers 8719, Center for Quantitative Economics (CQE), University of Muenster.
    • Handle: RePEc:cqe:wpaper:8719
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    References listed on IDEAS

    as
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    Keywords

    Carbon; Price Discovery; Information Leadership Share; EUA; Futures Markets; ETS;
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