Nonlinear price dynamics between CO2 futures and Brent
Massimo Peri and
Lucia Baldi
Applied Economics Letters, 2011, vol. 18, issue 13, 1207-1211
Abstract:
The growing expansion of European Union Emission Trading futures market and the parallel increase in the tendency of using such products also as financial instruments in the capital market outline the interest in the analysis of European Union Allowances (EUA) futures prices drivers. We applied recent developments in the threshold cointegration approach to investigate the presence of asymmetric dynamic adjusting processes between CO2 futures and spot Brent prices. We found evidence of the existences of long-run nonlinear relationships, with Brent prices driving EUA futures prices to a long-run equilibrium up to a point where the gap between the two prices exceeds a critical threshold. Hence, EUA futures market currently do not act only as a tool for compliance within the environmental regulation (i.e. to contain CO2 emissions), but has become a financial instrument to support firms' profit-maximizing behaviour.
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)
Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.
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:taf:apeclt:v:18:y:2011:i:13:p:1207-1211
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20
DOI: 10.1080/13504851.2010.532092
Access Statistics for this article
Applied Economics Letters is currently edited by Anita Phillips
More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().