Channeling the final Say in Politics

Peter S. Schmidt and Therese Werner ()
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Peter S. Schmidt: University Zurich, Switzerland
Therese Werner: ETH Zurich, Switzerland

No 12/165, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This study examines the relation of stock returns and the announcements on verified emissions in the European Emission Trading Scheme (EU ETS). In a first step we employ event study methods to detect possibly abnormal returns on the respective announcement dates using a sample of quoted stock market firms from Austria, Denmark, Germany and the UK. In a second step we link the estimated abnormal returns to firm characteristics based on the EU ETS (such as verified emissions or over-allocation) as well as to financial firm level data in a cross-sectional analysis. Even though the overall cost from the new regulation on the individual firms was minor, we find evidence for the asset value hypothesis, which states that higher verified emissions induce a higher future permit allocation. This suggests that investors did not perceive the EU ETS in its first set-up as an efficient and effective environmental policy instrument.

Keywords: Event study; European emission trading scheme; Regulation; Verified Emissions; Emission trade (search for similar items in EconPapers)
JEL-codes: G14 Q48 Q52 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-08
New Economics Papers: this item is included in nep-ene, nep-env and nep-eur
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