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Carbon price dynamics: Evidence from Phase II of the European Emission Trading Scheme

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  • Rickels, Wilfried
  • Görlich, Dennis
  • Oberst, Gerrit
  • Peterson, Sonja

Abstract

In this paper we empirically investigate potential determinants of allowance (EUA) price dynamics in the European Union Emission Trading Scheme (EU ETS) during Phase II. In contrast to previous papers, we analyze a significantly longer time series, place particular emphasis on the importance of price variable selection, and include an extensive data of renewable energy feed-in in Europe. We show (i) that results are extremely sensitive to choosing different price series of potential determinants, such as coal and gas prices, (ii) that EUA price dynamics are only marginally influenced by renewable energy provision in Europe, and iii) that EUA prices currently do not reflect marginal abatement costs across Europe. We conclude that the expectation of a more mature allowance market in Phase II cannot be confirmed.

Suggested Citation

  • Rickels, Wilfried & Görlich, Dennis & Oberst, Gerrit & Peterson, Sonja, 2012. "Carbon price dynamics: Evidence from Phase II of the European Emission Trading Scheme," Kiel Working Papers 1804, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1804
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    References listed on IDEAS

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    Cited by:

    1. Hintermann, Beat & Peterson, Sonja & Rickels, Wilfried, 2014. "Price and market behavior in Phase II of the EU ETS," Kiel Working Papers 1962, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Carbon emission trading; EU ETS; Carbon price influence factors; Fuel switching;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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