Network-Based Analysis of EU Emissions Trading Scheme

Beatrice Federica Paolella and Tanya Araújo

No 2024/0337, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: The European Union Emissions Trading Scheme (EU ETS) has been instrumental in mitigating carbon dioxide (CO2) emissions across Europe since its initiation on January 1, 2005. CO2 has emerged as a traded commodity in the EU ETS, governed by market fundamentals similar to those in other global commodity markets. The interplay of supply and demand, driven by the allocation of allowances, plays thus a crucial role. Here, using real data, we developed networks of EU ETS to model exchanges of allowances between EU countries. Our results provide new insights into the topological structure of trading from 2005-2020. Combining the results from centrality measures, clustering and modularity, the EU ETS networks can be seen in the transition from a structure with few clusters to a structure characterized by numerous clusters organized around new nodes with acquired centrality.

Keywords: Emissions Trading Scheme; Network Analysis; CO2 Trading; Allocation of Allowences. (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-eec, nep-ene and nep-net
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