The efficiency analysis of the European CO2 futures market

Bao-Jun Tang, Cheng Shen and Chao Gao

No 36, CEEP-BIT Working Papers from Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology

Abstract: The European Union Emissions Trading System (EU ETS) is the main international carbon trading market, in which European Union CO2 allowances (EUAs) are traded with increasing intensity. In order to help the market participants mitigate the market price risk, one possible way is to analyze the time range of market efficiency and the price discovery mechanism of EUA futures market and spot market. For this purpose, the paper provides the unit root test and the cointegration test for the EUA futures market during 2009-2011. Our result shows that the EUA futures market is efficient within 1 month. Furthermore, it illustrates that the impact of the price will continue for 3 months, examined by a vector error correction model (VECM).

Keywords: Market Efficiency; Cointegration; Vector Error Correction Model; European carbon futures market (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2012-06
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Citations: View citations in EconPapers (1)

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Journal Article: The efficiency analysis of the European CO2 futures market (2013)
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