ETS Markets and Electricity Futures Prices
36 Pages Posted: 22 Apr 2011
Date Written: April 12, 2011
Abstract
This paper addresses the economic impact of the carbon allowance market in the European Emission Trading Scheme (ETS) on the futures market of electricity, gas, and coal. Our findings seem to confirm that, as expected, electricity returns are positively affected by carbon allowances, coal, and natural gas returns. Additionally, a SVAR model with short-run restrictions and two lags shows that lagged returns of allowances affect current returns of allowances and energy futures prices. Finally, an impulse-response analysis seems to corroborate that electricity futures returns suffer the consequences from shocks on the allowances returns.
Keywords: Kyoto protocol, Price transmission, Volatility transmission, Certified Emissions Reduction
JEL Classification: C13, Q42, Q43, Q54
Suggested Citation: Suggested Citation
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