Carbon Credits and Crude Oil: An Investigation of the Price Returns Interaction in the International Market

Assis de Salles André () and Lima Renato Barros ()
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Assis de Salles André: Universidade Federal do Rio de Janeiro, Escola Politécnica, Av. Athos da Silveira Ramos 149, 21941-909 Rio de Janeiro, Brazil
Lima Renato Barros: Universidade Federal do Rio de Janeiro, Escola Politécnica, Av. Athos da Silveira Ramos 149, 21941-909 Rio de Janeiro, Brazil

Naše gospodarstvo/Our economy, 2024, vol. 70, issue 1, 1-12

Abstract: This paper aims to verify the relationship between the international markets for crude oil and carbon credits. We studied the returns of prices practiced in these markets, focusing on the transmission of shocks between oil prices and carbon credit prices. The methodological approach used financial econometrics to study these variables’ risk and return relationships. Besides causality and cointegration hypothesis tests, the VECM and GARCH models were estimates. There is a short- and long-term interaction between these variables. The volatility models show a significant association between the volatilities of the two variables of interest. Fossil fuels, mainly crude oil, generate energy that has substantial restrictions. At the same time, the carbon credits market has shown significant growth that can contribute to the use of energy from fossil fuels with parsimony and responsibility. Studying these variables and their interactions contributes to understanding the importance of the carbon market.

Keywords: Carbon credit; Crude oil price; VECM model; Volatility model (search for similar items in EconPapers)
JEL-codes: C32 C58 G15 Q42 Q54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ngooec:v:70:y:2024:i:1:p:1-12:n:1

DOI: 10.2478/ngoe-2024-0001

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