Measuring the Impact of Carbon Allowance Trading on Energy Prices

Fatemeh Nazifi and George Milunovich
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Fatemeh Nazifi: Macquarie University, Sydney, Australia

Energy & Environment, 2010, vol. 21, issue 5, 367-383

Abstract: We investigate time series linkages between the EU carbon allowance price and the prices of coal, oil, natural gas and electricity. We find no long-run relationship between the variables, but instead some short-run linkages. Using Granger causality tests and generalised impulse-response analysis we find evidence of links between i ) carbon and oil, ii ) carbon and natural gas, and iii ) electricity and carbon, as well as other links between the energy variables. The finding of no long-term relationship can be attributed either to the relative immaturity and imperfections of the carbon market, or the possibility that while carbon trading may result in a more efficient use of energy resources, it does not directly impact fossil fuel prices.

Keywords: Carbon Trading; Energy Prices; Climate Change; EU ETS; generalized impulse responses (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:engenv:v:21:y:2010:i:5:p:367-383

DOI: 10.1260/0958-305X.21.5.367

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