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First Evidence of Asymmetric Cost Pass-through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany

Georg Zachmann () and Christian Hirschhausen

No 708, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper applies the literature on asymmetric price transmission to the emerging commodity market for EU emissions allowances (EUA). We utilize an error correction model and an autoregressive distributed lag model to measure the relationship between CO2 price changes and the development of wholesale electricity prices. Using data from the German market for electricity and EUAs, we find that the rising prices of EUAs have a stronger impact on wholesale electricity prices than falling prices -- the first empirical evidence of asymmetric cost passthrough for these new allowances.

Pages: 8 p.
Date: 2007
New Economics Papers: this item is included in nep-eec, nep-ene, nep-env and nep-ind
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Related works:
Journal Article: First evidence of asymmetric cost pass-through of EU emissions allowances: Examining wholesale electricity prices in Germany (2008) Downloads
Working Paper: First Evidence of Asymmetric Cost Pass-Through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany (2007) Downloads
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