Kiel Working Papers, Kiel Institute for World Economics
No 1804:
Carbon Price Dynamics – Evidence from Phase II of the European Emission Trading Scheme
Wilfried Rickels, Dennis Görlich, Gerrit Oberst and Sonja Peterson
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
Keywords: Carbon emission trading, EU ETS, Carbon price influence factors, Fuel switching; (follow links to similar papers)
JEL-Codes: C22,; G14,; Q54; (follow links to similar papers)
40 pages, November 2012
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