Carbon Pricing in Current Global Institutional Changes

Liudmila Reshetnikova (), Natalia Boldyreva, Anton Devyatkov, Zhanna Pisarenko and Danila Ovechkin
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Liudmila Reshetnikova: Department of Economics and Finance, University of Tyumen, 6 Volodarskogo St., 625003 Tyumen, Russia
Natalia Boldyreva: Department of Economics and Finance, University of Tyumen, 6 Volodarskogo St., 625003 Tyumen, Russia
Anton Devyatkov: Department of Fundamental Mathematics and Mechanics, University of Tyumen, 6 Volodarskogo St., 625003 Tyumen, Russia
Zhanna Pisarenko: Department of Risk Management and Insurance, St Petersburg University, 7/9, Universitetskaya Emb., 199034 St Petersburg, Russia
Danila Ovechkin: Department of Economics and Finance, University of Tyumen, 6 Volodarskogo St., 625003 Tyumen, Russia

Sustainability, 2023, vol. 15, issue 4, 1-19

Abstract: Global institutional changes (GICs), having influenced energy prices, led to a steady upward trend in carbon prices on the EU ETS. The aim of the article is to assess the changes in the relationship between carbon prices and energy prices under GICs. The Bai–Perron tests for structural breaks identified two dates as the breakpoint, 21 April 2016 and 21 September 2020. We test the hypothesis that powerful external factors (GIC) are changing the trend pattern of the carbon price time series. New pricing rules of the carbon price are being formed after the breakpoint. We use daily observations from 4 January 2010 to 1 September 2022. We use GARCH models with multiple stationary time series to discover a relationship energy price with the carbon price before and after the break points. We found that three models for two breakpoints better describe the relationship between carbon prices and energy prices than two models for one breakpoint, much less one model for the entire period. We find that the carbon price depends on energy prices, especially on the price of oil, in a statistically significant way, but the gas price is not statistically significant after 21 September 2020.

Keywords: ETS; greenhouse gases; carbon price; global institutional changes; breakpoints; econometric analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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