Allowance price drivers in the first phase of the EU ETS

Beat Hintermann

Journal of Environmental Economics and Management, 2010, vol. 59, issue 1, 43-56

Abstract: In the first phase of the EU Emissions Trading Scheme (EU ETS), the price per ton of CO2 initially rose to over [euro]30; the price then collapsed to essentially zero by mid 2007. By deriving a structural model of the allowance price under the assumption of efficient markets I examine the extent to which this variation in price can be explained by marginal abatement costs. I then gradually relax the model by allowing for delayed adjustment of price to fundamentals, as well as by introducing lagged LHS variables. The pattern of results suggests that while prices were not initially driven by marginal abatement costs, this inefficiency was largely corrected after the accounting of 2005 emissions in April 2006.

Keywords: Emissions; permit; markets; Air; pollution; Climate; change; Bubble; Speculation; CO2; Asset; pricing; EU; ETS (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (218)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0095-0696(09)00086-2
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Allowance Price Drivers in the First Phase of the EU ETS (2009)
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:jeeman:v:59:y:2010:i:1:p:43-56

Access Statistics for this article

Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

More articles in Journal of Environmental Economics and Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().