 California carbon allowance futuresShimeng Shi and Jia Zhai Finance Research Letters, 2024, vol. 70, issue C Abstract: Carbon pricing is an important tool to address climate challenge, while limited attention has been given to the U.S. carbon derivatives market, i.e., California carbon allowance (CCA) futures market. To deal with various data frequencies, we use a mixed frequency vector autoregressive model. We find that changes in trading positions of hedgers and speculators can affect the CCA futures returns. Like other commodity futures markets, commercials act as contrarians, while non-commercials behave like momentum traders. We find some evidence of a feedback relationship between the CCA futures market and California's economic condition. The interaction between the energy sector and the carbon futures market is evident. The CCA futures market is more sensitive to climate policy risk than abnormal temperature. Other ETSs’ carbon futures prices and inflation expectation could affect the CCA futures returns on some trading days. Keywords: California carbon allowance futures; CFTC's trading position; Energy sector; Real economy; Climate change (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324012947 DOI: 10.1016/j.frl.2024.106265 Access Statistics for this article Finance Research Letters is currently edited by R. Gençay More articles in Finance Research Letters from Elsevier |
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