Forecasting volatility of carbon under EU ETS: a multi-phase study

Ajay Dhamija (), Surendra S. Yadav and Jain Pk
Additional contact information
Surendra S. Yadav: Indian Institute Technology (IIT)
Jain Pk: Indian Institute Technology (IIT)

Environmental Economics and Policy Studies, 2017, vol. 19, issue 2, No 4, 299-335

Abstract: Abstract Carbon management is a strategic priority and organizations need to forecast carbon for that. We aim to find out the best ARIMA-GARCH model for forecasting conditional return and volatility of European Union Allowance (EUA) for all three phases of European Union Emissions Trading Scheme and the Rolled Over series. We use European Climate Exchange Dec 2007, Dec 2012, Dec 2015 expiry and the Rolled Over Dec 2015 expiry future contracts of EUA. The previous studies in this area have focused on a particular subset of EUA data and do not take care of the multicollinearities. We take EUA data from all three phases and the Rolled Over series, adopt principal component analysis to eliminate multicollinearities and then fit GARCH models for comprehensive analysis. The study establishes that the best models for predicting EUA phase I, II, III and Rolled Over series are asymmetric GARCH models.

Keywords: European Union Allowance (EUA); EU ETS; Volatility Clustering; Conditional heteroscedasticity; ARIMA; GARCH (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://link.springer.com/10.1007/s10018-016-0155-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:envpol:v:19:y:2017:i:2:d:10.1007_s10018-016-0155-4

Ordering information: This journal article can be ordered from
http://www.springer. ... mental/journal/10018

DOI: 10.1007/s10018-016-0155-4

Access Statistics for this article

Environmental Economics and Policy Studies is currently edited by Ken-Ichi Akao

More articles in Environmental Economics and Policy Studies from Springer, Society for Environmental Economics and Policy Studies - SEEPS Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().