EconPapers    
Economics at your fingertips  
 

The erratic behaviour of the EU ETS on the path towards consolidation and price stability

Federico Galán-Valdivieso (), Elena Villar-Rubio () and María-Dolores Huete-Morales ()
Additional contact information
Federico Galán-Valdivieso: University of Almeria
Elena Villar-Rubio: University of Granada, Campus La Cartuja
María-Dolores Huete-Morales: University of Granada, Campus La Cartuja

International Environmental Agreements: Politics, Law and Economics, 2018, vol. 18, issue 5, 689-706

Abstract: Abstract The Kyoto Protocol envisages the use of various instruments to achieve emission reduction targets, one of which is the European Union Emission Trading Scheme (EU ETS), the most important market worldwide for CO2 emission allowances. The volume of European Union Allowances traded represents over 45% of all the carbon dioxide generated by human activity within the continent. In its first two phases (2005–2012), the behaviour of the EU ETS was erratic, as a result of discretionary policies, an oversupply of allowances and reduced economic activity due to the global crisis. These factors caused excessively low prices that distorted the initial goals of achieving low-carbon solutions. From 2013, changes were made to the market regulation mechanisms in order to correct these structural deficiencies. Empirical analysis of daily prices in the two central phases of the market, following the pattern of ARCH and GARCH models, shows that the measures taken within the EU generated greater confidence and stability in the market and thus reduced volatility. Subsequent price behaviour, following a bullish path, has confirmed the success of the measures taken and their contribution to fulfilling emission reduction targets.

Keywords: Kyoto Protocol; Emissions Trading System; EUA trading; Price shocks; GARCH models (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10784-018-9411-3 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:ieaple:v:18:y:2018:i:5:d:10.1007_s10784-018-9411-3

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/10784

Access Statistics for this article

International Environmental Agreements: Politics, Law and Economics is currently edited by Joyeeta Gupta

More articles in International Environmental Agreements: Politics, Law and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-11-06
Handle: RePEc:spr:ieaple:v:18:y:2018:i:5:d:10.1007_s10784-018-9411-3