Role of ECX futures in carbon pricing: Intraday evidence from EU-ETS

Charu Vadhava

Economics Letters, 2025, vol. 253, issue C

Abstract: This study investigates the price discovery and volatility spillover between ECX spot and futures prices using high-frequency data for the fourth phase of EU-ETS. The analysis reveals the higher contribution of ECX futures in price formation. Furthermore, volatility spillover analysis shows that volatility transmission occurs predominantly from ECX futures to the spot market, making the ECX futures market a shock (information) transmitter and the spot market a shock (information) receiver in net terms. The informativeness of ECX futures in carbon pricing can be attributed to higher liquidity, higher trading volume, and the presence of informed institutional traders in the ECX futures market.

Keywords: European union emission trading scheme (EU-ETS); Price discovery; Volatility spillover; Market microstructure (search for similar items in EconPapers)
JEL-codes: G13 G14 G15 Q50 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:253:y:2025:i:c:s0165176525002381

DOI: 10.1016/j.econlet.2025.112401

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