Price and Network Dynamics in the European Carbon Market

Andreas Karpf, Antoine Mandel and Stefano Battiston

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: This paper presents an analysis of the European Emission Trading System as a transaction network. It is shown that, given the lack of a centralized market place, industrial actors had to resort to local connections and financial intermediaries to participate in the market. This gave rise to a hierarchical structure in the transaction network. To empirically relate networks statistics to market outcomes a PLS-PM modeling technique is introduced. It is shown that the asymmetries in the network induced market inefficiencies (e.g. increased bid-ask spread). Albeit the efficiency of the market has improved from the beginning of Phase II, the asymmetry persists, imposing unnecessary additional costs on agents and reducing the effectiveness of the market as a mitigation instrument

Keywords: carbon market; network; climate economics (search for similar items in EconPapers)
JEL-codes: D85 L14 Q56 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2017-02
New Economics Papers: this item is included in nep-ene, nep-env, nep-mst, nep-ore and nep-res
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Downloads: (external link)
ftp://mse.univ-paris1.fr/pub/mse/CES2017/17010.pdf (application/pdf)

Related works:
Journal Article: Price and network dynamics in the European carbon market (2018)
Working Paper: Price and network dynamics in the European carbon market (2018)
Working Paper: Price and network dynamics in the European carbon market (2018)
Working Paper: Price and network dynamics in the European carbon market (2018)
Working Paper: Price and Network Dynamics in the European Carbon Market (2017)
Working Paper: Price and Network Dynamics in the European Carbon Market (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:17010

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