Understanding the link between aggregated industrial production and the carbon price

Julien Chevallier

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Abstract: This chapter assesses the extent to which economic activity and the carbon price are linked. Carbon price drivers can be mainly related to energy and institutional variables. However, the influence of the macroeconomic environment shall not be undermined. Various approaches exist in the literature, which favor financial market variables over macroeconomic variables. Following a review of the state of the EU ETS, the main channel of transmission between the variation of macroeconomic activity and the carbon price is recalled, by using the aggregated industrial production as a proxy. An original empirical application unfolds, by studying the carbon-macroeconomy relationship in the threshold VAR model during 2005-2013. Further research is called upon in nonlinear econometrics.

Keywords: Carbon Price; Economic Activity; Industrial Production; Nonlinear Time Series (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-ene and nep-env
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00846340
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Published in The Economics of Green Energy and Efficiency, Springer, pp.1-22, 2013

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