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Price and network dynamics in the European carbon market

Andreas Karpf (), Antoine Mandel () and Stefano Battiston
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Andreas Karpf: CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper presents an analysis of the European Emission Trading System as a transaction network. It is shown that, given the lack of well-identified trading institutions, industrial actors had to resort to local connections and financial intermediaries to participate in the market. This gave rise to a hierarchical structure in the transaction network. It is then shown that the asymmetries in the network induced market inefficiencies (e.g., increased bid-ask spread) and informational asymmetries, that have been exploited by central agents at the expense of less central ones. Albeit the efficiency of the market has improved from the beginning of Phase II, the asymmetry persists, imposing unnecessary additional costs on agents and reducing the effectiveness of the market as a mitigation instrument.

Keywords: Network; Carbon market; Climate change; Microstructure (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-ene, nep-env, nep-mst, nep-ore, nep-reg and nep-res
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01905985
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Published in Journal of Economic Behavior and Organization, Elsevier, 2018, 153, pp.103-122. ⟨10.1016/j.jebo.2018.06.019⟩

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Related works:
Journal Article: Price and network dynamics in the European carbon market (2018) Downloads
Working Paper: Price and network dynamics in the European carbon market (2018) Downloads
Working Paper: Price and network dynamics in the European carbon market (2018) Downloads
Working Paper: Price and Network Dynamics in the European Carbon Market (2017) Downloads
Working Paper: Price and Network Dynamics in the European Carbon Market (2017) Downloads
Working Paper: Price and Network Dynamics in the European Carbon Market (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-01905985

DOI: 10.1016/j.jebo.2018.06.019

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