Evaluating Emission Trading as a Policy Tool - Evidence from Conditional Jump Models

Marc Gronwald () and Janina Ketterer

No 2682, CESifo Working Paper Series from CESifo

Abstract: This paper, first, empirically investigates European emission allowance (EUA) prices and, second, evaluates emission trading as a policy measure. Applying combined jump GARCH models yields strong evidence of conditional jump behavior. This implies that EUA prices are subject to unexpected movements and that a considerable degree of uncertainty is present. According to the real option literature, uncertainty has adverse effects on investment decisions. Thus, investments in abatement technologies are likely to be postponed due to the peculiar characteristics of emission allowance prices. Furthermore, this price behavior is at odds with the theoretical notion that emission prices equal marginal abatement costs.

Keywords: emission allowance prices; jumps; GARCH; real options (search for similar items in EconPapers)
JEL-codes: C22 Q50 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp2682.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2682

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().