Before revision:  Testing for the former, we neither find that abatement-related fundamentals display equally explosive behavior, nor a change in coefficients using a complementary time-varying non-parametrical regression model. Finally, we examine the two potential explanations from a theoretical angle to shed light on candidate underlying mechanisms. We conclude that no explanation can be ruled out, but further research is needed to increase confidence in either .
After revision:  Testing for the former, we neither find that abatement-related fundamentals display equally explosive behavior, nor a change in coefficients using a complementary time-varying coefficient regression, formal bubble detection as well as time stamping and crash odds prediction - to juxtapose the regulators' claim versus the concurrent explanation. We find evidence of a long period of explosive behaviour in allowance prices, starting in March 2018 when the reform was adopted. Our results suggest that the reform triggered market participants into speculation, and question regulators' confidence in its long-term outcome. This has implications for both the further development of the EU ETS, and the long lasting debate about taxes versus emission trading schemes .