The impact of expectations of returns and investment time scales on carbon price: findings from EU ETS

Zhen-Hua Feng, Bin Ouyang and Jie Guo

International Journal of Global Energy Issues, 2016, vol. 39, issue 6, 382-393

Abstract: Carbon price fluctuations affect the carbon market's efficiency and CO₂ emission reductions. In this paper, Zipf analysis technology is used to analyse the impact of expectations of returns and time scales on carbon price in the European Union Emissions Trading Scheme (EU ETS). Results show the probability of prices declining becomes greater than the probability of prices increasing at longer time scales. Traders with different expectations of returns have different price perceptions. For traders with low expectations of returns, carbon prices are affected by market mechanisms, seasonal weather variations and other heterogeneous events, and carbon price fluctuations are relatively well perceived. Carbon prices are more volatile and higher risks and uncertainties are more characteristic for high expectations of returns.

Keywords: carbon pricing; emissions trading; price volatility; return on investment; ROI; investment time scales; carbon emissions; EU ETS; European Union Emissions Trading Scheme; price fluctuations; carbon markets; price perceptions. (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijgeni:v:39:y:2016:i:6:p:382-393

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