Market efficiency in the European carbon markets

Amelie Charles, Olivier Darné and Jessica Fouilloux ()

Energy Policy, 2013, vol. 60, issue C, 785-792

Abstract: In this paper, we study the relationship between futures and spot prices in the European carbon markets from the cost-of-carry hypothesis. The aim is to investigate the extent of efficiency market. The three main European markets (BlueNext, EEX and ECX) are analyzed during Phase II, covering the period from March 13, 2009 to January, 17, 2012. Futures contracts are found to be cointegrated with spot prices and interest rates for several maturities in the three CO2 markets. Results are similar when structural breaks are taken into account. According to individual and joint tests, the cost-of-carry model is rejected for all maturities and CO2 markets, implying that neither contract is priced according to the cost-of-carry model. The absence of the cost-of-carry relationship can be interpreted as an indicator of market inefficiency and may bring arbitrage opportunities in the CO2 market.

Keywords: CO2 emission allowances; Cost-of-carry model; Market efficiency (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421513003716
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Market efficiency in the European carbon markets (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:60:y:2013:i:c:p:785-792

DOI: 10.1016/j.enpol.2013.05.036

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().