Carbon price dynamics: Evidence from Phase II of the European Emission Trading Scheme

Wilfried Rickels, Dennis Görlich, Gerrit Oberst and Sonja Peterson ()

No 1804, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper we empirically investigate potential determinants of allowance (EUA) price dynamics in the European Union Emission Trading Scheme (EU ETS) during Phase II. In contrast to previous papers, we analyze a significantly longer time series, place particular emphasis on the importance of price variable selection, and include an extensive data of renewable energy feed-in in Europe. We show (i) that results are extremely sensitive to choosing different price series of potential determinants, such as coal and gas prices, (ii) that EUA price dynamics are only marginally influenced by renewable energy provision in Europe, and iii) that EUA prices currently do not reflect marginal abatement costs across Europe. We conclude that the expectation of a more mature allowance market in Phase II cannot be confirmed.

Keywords: Carbon emission trading; EU ETS; Carbon price influence factors; Fuel switching (search for similar items in EconPapers)
JEL-codes: C22 G14 Q54 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1804

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