Temporal restrictions on emissions trading and the implications for the carbon futures market: Lessons from the EU emissions trading scheme

George Daskalakis

Energy Policy, 2018, vol. 115, issue C, 88-91

Abstract: Prohibiting the intertemporal trading of emission allowances induces positive risk premia in futures prices when the trading of the contracts and their expiry take place in time periods separated by this trading ban. In Phase I of the EU Emissions Trading Scheme (EU ETS) these were in the order of about 28% of the futures price on average, depending on the contract's expiry in Phase II. Environmental policy makers should avoid such restrictions as they result in increased hedging costs for polluters that are, since emission allowances represent opportunity costs, potentially borne by consumers.

Keywords: Emission allowances; Intertemporal trading; Carbon futures; Risk premia; EU ETS (search for similar items in EconPapers)
JEL-codes: G13 Q02 Q58 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:115:y:2018:i:c:p:88-91

DOI: 10.1016/j.enpol.2018.01.008

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