The inconvenience yield of carbon futures

Fernando Palao and Ángel Pardo

Energy Economics, 2021, vol. 101, issue C

Abstract: Since 2009, the European Carbon Futures Market has been in a permanent contango situation that is characterised by systematic negative convenience yields that allow investors to exploit profitable arbitrage opportunities. The objective of this paper is to analyse the possible drivers of these negative convenience yields. Our empirical results indicate that although some carbon trading variables are behind this contango situation, the carbon inconvenience yield is better explained if other financial markets and variables are considered, suggesting a financialization of the European Carbon Futures Market.

Keywords: Carbon futures; Contango; Convenience yield; ICE (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:101:y:2021:i:c:s0140988321003479

DOI: 10.1016/j.eneco.2021.105461

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