Influences from the European Parliament on EU Emissions Prices

27 Pages Posted: 15 Apr 2015

See all articles by Peter Deeney

Peter Deeney

School of Engineering, University College Cork

Mark Cummins

University of Strathclyde

Michael M. Dowling

Dublin City University Business School; ESC Rennes School of Business

Alan Smeaton

Dublin City University - School of Computing

Date Written: April 5, 2015

Abstract

The decisions of the European Parliament (EP) are shown to influence both EU emission allowance (EUA) prices and volatility. This is not a universal influence though, only the decisions which are either (i) parliament-led, as opposed to topical decisions originating from the political groups, (ii) made during times of low market sentiment or (iii) made during times of low market awareness, reduce the price and increase the volatility. Daily EUA prices from 2007 to 2014 are used in the study, with decisions analysed using an event study approach for price impact, and a GARCH specification for volatility impact. Our findings suggest the need for policymakers to improve communication of long-term strategies for the EUA market in order to reduce the evident ongoing uncertainty experienced by traders around each decision made by the EP. The sentiment findings indicate a need to consider market dynamics in terms of decision timing so that market turbulence is not an unintended by-product of an EP decision.

Keywords: EU emission allowances, market sentiment, media exposure, European Parliament

JEL Classification: Q58, G14, C12

Suggested Citation

Deeney, Peter and Cummins, Mark and Dowling, Michael M. and Smeaton, Alan, Influences from the European Parliament on EU Emissions Prices (April 5, 2015). Available at SSRN: https://ssrn.com/abstract=2591983 or http://dx.doi.org/10.2139/ssrn.2591983

Peter Deeney (Contact Author)

School of Engineering, University College Cork ( email )

5 Bloomfield Terrace Western Road
Cork
Ireland
Cork (Fax)

Mark Cummins

University of Strathclyde ( email )

16 Richmond Street
Glasgow 1XQ, Scotland G1 1XQ
United Kingdom

Michael M. Dowling

Dublin City University Business School ( email )

Dublin 9
Ireland

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000
France

Alan Smeaton

Dublin City University - School of Computing ( email )

Glasnevin, Dublin 9 Co
Dublin
Ireland

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