Banking behavior under uncertainty: Evidence from the US Sulfur Dioxide Emissions Allowance Trading Program

Olivier Rousse and Benoît Sévi

Cahiers du CREDEN (CREDEN Working Papers) from CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1

Abstract: The aim of this paper is to examine portfolio management of emission allowances in the US Sulfur Dioxide Emissions Allowance Trading Program, to determine whether utilities have a real motive to bank when risk increases. We test a theoretical model linking the motivation of the firm to accumulate permits in order to prepare itself to face a risky situation in the future. Empirical estimation using data for years 2001 to 2004 provides evidence of a relationship between banking behavior and uncertainty the utility is facing with.

Keywords: Emissions Trading; Permits Banking; Acid Rain Program Uncertainty; Risk Aversion; Prudence. (search for similar items in EconPapers)
JEL-codes: D81 G11 Q28 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006
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Citations: View citations in EconPapers (2)

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