IDEAS home Printed from https://ideas.repec.org/p/mse/cesdoc/12047.html
   My bibliography  Save this paper

Evidence of a nonlinear effect of the EU ETS on the electricity-generation sector

Author

Abstract

This article considers the evidence for threshold effects in the relationship between electricity and emission permit prices in France and Germany during the second phase of the EU ETS. Specifically, we compare linear and nonlinear threshold models of electricity prices using Hansen's (2000) approach of sample splitting and threshold estimation. We find evidence of nonlinear threshold effects in both countries. The estimated carbon price thresholds are 14.94 € and 12.57 € in France and Germany, respectively. In Germany, the carbon price does not affect the electricity price below this threshold. In France, the price of emission allowances affects the cost of electricity generation only below the carbon-price threshold, thus revealing speculative behavior by French electricity producers on the carbon-allowance market. This is not the case for German electricity producers

Suggested Citation

  • Ibrahim Ahamada & Djamel Kirat, 2012. "Evidence of a nonlinear effect of the EU ETS on the electricity-generation sector," Documents de travail du Centre d'Economie de la Sorbonne 12047, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:12047
    as

    Download full text from publisher

    File URL: http://mse.univ-paris1.fr/pub/mse/CES2012/12047.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kirat, Djamel & Ahamada, Ibrahim, 2011. "The impact of the European Union emission trading scheme on the electricity-generation sector," Energy Economics, Elsevier, vol. 33(5), pages 995-1003, September.
    2. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
    3. Ibrahim Ahamada & Djamel Kirat, 2012. "The impact of phase II of the EU ETS on the electricity-generation sector," Documents de travail du Centre d'Economie de la Sorbonne 12007, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
    5. Perrels, Adriaan & Honkatukia, Juha & Mälkönen, Ville, 2006. "Impacts of the European Emission Trade System on Finnish Wholesale Electricity Prices," Discussion Papers 405, VATT Institute for Economic Research.
    6. Ibrahim Ahamada & Djamel Kirat, 2012. "The impact of phase II of the EU ETS on the electricity-generation sector," Post-Print halshs-00673918, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ibrahim Ahamada & Djamel Kirat, 2012. "Evidence of a nonlinear effect of the EU ETS on the electricity-generation sector," Post-Print halshs-00717629, HAL.
    2. Djamel Kirat & Ibrahim Ahamada, 2016. "Evidence for threshold eff​ects in the pass-through of carbon prices to wholesale electricity prices," Economics Bulletin, AccessEcon, vol. 36(4), pages 2350-2364.
    3. Frieder Mokinski & Nikolas Wölfing, 2014. "The effect of regulatory scrutiny: Asymmetric cost pass-through in power wholesale and its end," Journal of Regulatory Economics, Springer, vol. 45(2), pages 175-193, April.
    4. Chiu, Chien-Liang & Chang, Ting-Huan, 2009. "What proportion of renewable energy supplies is needed to initially mitigate CO2 emissions in OECD member countries?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(6-7), pages 1669-1674, August.
    5. Young-Joo Kim & Myung Hwan Seo, 2017. "Is There a Jump in the Transition?," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 35(2), pages 241-249, April.
    6. Aslanidis, Nektarios, 2007. "Business Cycle Regimes in CEECs Production: A Threshold SURE Approach," Working Papers 2072/5318, Universitat Rovira i Virgili, Department of Economics.
    7. Mindaugas Butkus & Diana Cibulskiene & Lina Garsviene & Janina Seputiene, 2021. "Empirical Evidence on Factors Conditioning the Turning Point of the Public Debt–Growth Relationship," Economies, MDPI, vol. 9(4), pages 1-22, December.
    8. Massacci, Daniele, 2017. "Least squares estimation of large dimensional threshold factor models," Journal of Econometrics, Elsevier, vol. 197(1), pages 101-129.
    9. Zhang, Xiaobei & Wang, Xiaojun, 2021. "Measures of human capital and the mechanics of economic growth," China Economic Review, Elsevier, vol. 68(C).
    10. Stöllinger, Roman, 2013. "International spillovers in a world of technology clubs," Structural Change and Economic Dynamics, Elsevier, vol. 27(C), pages 19-35.
    11. Abdulqadir, Idris A. & Asongu, Simplice A., 2022. "The asymmetric effect of internet access on economic growth in sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 44-61.
    12. Che, Chou Ming, 2013. "Panel threshold analysis of Taiwan's outbound visitors," Economic Modelling, Elsevier, vol. 33(C), pages 787-793.
    13. Rosmah Nizam & Zulkefly Abdul Karim & Tamat Sarmidi & Aisyah Abdul Rahman, 2020. "Financial Inclusion and Firms Growth in Manufacturing Sector: A Threshold Regression Analysis in Selected Asean Countries," Economies, MDPI, vol. 8(4), pages 1-12, October.
    14. Singh, Tarlok, 2014. "On the regime-switching and asymmetric dynamics of economic growth in the OECD countries," Research in Economics, Elsevier, vol. 68(2), pages 169-192.
    15. Hyun Joung Jin & Eun Young You, 2019. "Do Discounts in Ticket Prices Induce Sustainable Profit to Performing Arts Suppliers?," Sustainability, MDPI, vol. 11(14), pages 1-12, July.
    16. Kadilli, Anjeza & Krishnakumar, Jaya, 2022. "Smooth Transition Simultaneous Equation Models," Journal of Economic Dynamics and Control, Elsevier, vol. 145(C).
    17. Strikholm, Birgit & Teräsvirta, Timo, 2005. "Determining the Number of Regimes in a Threshold Autoregressive Model Using Smooth Transition Autoregressions," SSE/EFI Working Paper Series in Economics and Finance 578, Stockholm School of Economics, revised 11 Feb 2005.
    18. repec:wsr:wpaper:y:2013:i:114 is not listed on IDEAS
    19. Octavio Fernández-Amador & Joseph F. Francois & Doris A. Oberdabernig & Patrick Tomberger, 2020. "Economic growth, sectoral structures, and environmental methane footprints," Applied Economics, Taylor & Francis Journals, vol. 52(13), pages 1460-1475, March.
    20. Philip Arestis & Andrea Cipollini & Bassam Fattouh, 2004. "Threshold Effects in the U.S. Budget Deficit," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 214-222, April.
    21. Chen, Haiqiang & Choi, Paul Moon Sub & Hong, Yongmiao, 2013. "How smooth is price discovery? Evidence from cross-listed stock trading," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 668-699.

    More about this item

    Keywords

    Carbon emission trading; energy prices; nonlinear threshold model;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:mse:cesdoc:12047. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Lucie Label (email available below). General contact details of provider: https://edirc.repec.org/data/cenp1fr.html .

    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.