Market Efficiency and the U.S. Market for Sulfur Dioxide Allowances: Working Paper 2014-01

Claudia Hitaj and Andrew Stocking

No 45044, Working Papers from Congressional Budget Office

Abstract: Focusing on the U.S. sulfur dioxide (SO2) allowance market from its inception (in 1994) to 2009, we model allowance prices to determine the influence of market fundamentals—such as prices of high- and low-sulfur coal—on allowance price level and volatility. Our empirical analysis finds that the SO2 market, similar to other emission markets studied in the literature, had relatively weak influence of market fundamentals for several years after launch—that is, allowance prices did not reflect marginal abatement costs for the first several years of operation. However, we find

Date: 2014-01-27
New Economics Papers: this item is included in nep-com, nep-env and nep-sog
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