How does carbon price change? Evidences from EU ETS

Zhen-Hua Feng, Chun-Feng Liu and Yi-Ming Wei

No 11, CEEP-BIT Working Papers from Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology

Abstract: By proposing the hypotheses for carbon price volatility, this paper uses variance ratio and Ensemble Empirical mode decomposition (EEMD) to analyze the carbon price. Results show that carbon price is influenced by temperature, market mechanism and heterogeneous environment. Carbon market is temperature-sensitive, affected by seasonal changes, which presents a style of movement amplitude; Carbon price is affected by the market mechanism at a high frequency, with the duration being less than 15 weeks and amplitudes less than 5 euros. Heterogeneity environment has an impact on carbon price at a low frequency, the duration lasting more than 34 weeks or even more and amplitudes more than 10 euros or higher. Meanwhile, the analysis for historical carbon price change shows the long term trend declines gradually since 2005 from 18 to 16 euro per ton. The continuing declining trend agrees with special events by time. Our research explores the reasons of carbon price volatility and some recommendations are given trying to regulate carbon market.

Keywords: carbon price; Ensemble Empirical Mode Decomposition; variance ratio; price volatility; temperature sensitivity (search for similar items in EconPapers)
JEL-codes: C02 Q54 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2010-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: How does carbon price change? Evidences from EU ETS (2011)
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