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What policy adjustments in the EU ETS truly affected the carbon prices?

Ying Fan, Jun-Jun Jia, Xin Wang and Jin-Hua Xu

Energy Policy, 2017, vol. 103, issue C, 145-164

Abstract: Carbon market becomes increasingly popular as a cost-effective instrument to mitigate CO2 emissions. However, its construction is a learning-by-doing process, and needs consistent regulatory updates in order to deliver optimal effects. This paper uses the event study method to assess the impacts of different policy adjustments on the EUA returns in the European Union Emissions Trading Scheme (EU ETS) since 2005. Comparing to existing studies that focus on the impact of a single policy, this paper provides a complementary reference on if and to what extent policy adjustments can impact the carbon prices by classifying all regulatory update events into six categories. Its key findings are as follows. First, aggregate impacts of total 50 events studied are low while impacts of events having underlying negative impacts are higher than those having underlying positive impacts. Second, 24 events have significant impacts on EUA returns and are coherent to their theoretical impacts (except one event). Third, events having negligible impact on EUA returns are those that are announced not for the first time or those having no impact on CO2 quotas supply and demand. Finally, there are different impact patterns: some events have different impacts on short-end and long-end carbon prices.

Keywords: Regulatory policy announcements; Event study; Carbon price; EU ETS; Policy evaluation (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:enepol:v:103:y:2017:i:c:p:145-164