a nonparametric copula based test for conditional independence with applications to granger causality this article proposes a new nonparametric test for conditional independence that can directly be applied to test for granger causality based on the comparison of copula densities the test is easy to implement because it does not involve a weighting function in the test statistic and it can be applied in general settings since there is no restriction on the dimension of the time series data in fact to apply the test only a bandwidth is needed for the nonparametric copula we prove that the test statistic is asymptotically pivotal under the null hypothesis establishes local power properties and motivates the validity of the bootstrap technique that we use in finite sample settings a simulation study illustrates the size and power properties of the test we illustrate the practical relevance of our test by considering two empirical applications where we examine the granger noncausality between financial variables in a first application and contrary to the general findings in the literature we prov

coal overcapacity in china multiscale analysis and prediction gaining a quantitative understanding of the causes of coal overcapacity and accurately predicting it are important for both government agencies and coal enterprises following the decomposition reconstruction prediction concept a combined ensemble empirical mode decomposition least square support vector machine autoregressive integrated moving average eemd lssvm arima model is proposed for quantitatively analyzing and forecasting coal overcapacity in china the results show that the main causes of coal overcapacity in china include insufficient demand market failure and institutional distortion institutional distortion with an influence degree of 73 75 is the most fundamental and influential factor from 2017 to 2019 the scale of coal overcapacity in china will reach between 1 721and 1 819 billion tons suggesting that coal overcapacity will remain a serious problem the rate of coal overcapacity caused by insufficient demand will fluctuate slightly while coal overcapacity caused by market failure will trend downward but the impact of institutional distortion on coal overcapacity will be exacerbated a statistical analysis demonstrates that the eemd lssvm arima model significantly outperformed other widely developed baselines e g arima lssvm eemd arima and eemd lssvm

competitive procurement of ancillary services by an independent system operator this paper discusses the competitive procurement of ancillary services by an independent system operator iso the paper assumes the existence of an underlying market for energy and explains why this energy market must be accompanied by a market for ancillary services these services include operating reserves and automatic generation control agc both of which may require generators that are infra marginal in the energy market to choose between supplying energy or ancillary services the paper discusses the design of an auction for these services that has formed the basis for the california iso s ancillary services market the paper also discusses the real time dispatch of ancillary services

impact of the carbon price on the integrating european electricity market we study the impact of the carbon price on the integrating electricity market in the eu our theoretical framework suggests that the price of carbon has a positive but uneven impact on electricity prices depending on the marginal production plant the carbon price may increase price differences in the short run we apply time series analysis on daily forward data from 2003 to 2011 and investigate whether we can find empirical evidence for our analytical findings our results support the hypotheses that integration in electricity prices has increased over time and that the carbon price has a positive but uneven impact on the integration of prices

time varying convergence in european electricity spot markets and their association with carbon and fuel prices abstract long run dynamics of electricity prices are expected to reflect fuel price developments since fuels generally account for a large share in the cost of generation as an integrated european market for electricity develops wholesale electricity prices should be converging as a result of market coupling and increased interconnectivity electricity mixes are also changing spurred by a drive to significantly increase the share of renewables consequently the electricity wholesale price dynamics are evolving and the fuel electricity price nexus that has been described in the literature is likely to reflect this evolution this study investigates associations between spot prices from the british french and nordpool markets with those in connected electricity markets and fuel input prices from december 2005 to october 2013 in order to assess the time varying dynamics of electricity spot price series localized autocorrelation functions are used electricity spot prices in the three markets are found to have stationary and non stationary periods when a trend in spot prices is observed it is likely to reflect the trend in fuel prices cointegration analysis is then used to assess co movement between electricity spot prices and fuel inputs to generation the results show that british electricity spot prices are associated with fuel prices and not with price developments in connected markets while the opposite is observed in the french and nordpool day ahead markets

china s carbon emissions trading overview challenges and future because china has emerged as the largest greenhouse gas ghg emitter in total annual emissions to accelerate the pace of ghg emission reduction in china is important to the success of global efforts in addressing climate change carbon trading is a market mechanism and key instrument in the mitigation of climate change this paper explores the policy process and development state to date of china s carbon trade market to understand the emergence and development of that market and to understand what barriers are hampering china s carbon trade market development to achieve this goal this paper introduces and analyzes china s status in the international market examines the factors driving carbon market launching by the chinese government and traces the development of mandatory carbon emission trading and voluntary emission trading it is argued that china s carbon trading market is confronted with challenges such as the absence of a functional carbon trading market inaccuracy of the quota allocation an imperfect trading mechanism and lagging legislation at the present stage shortcomings such as having no real time carbon price and dominated spot transactions differentiate china s trade market substantially from a functional system a quick market integration of china s carbon market appears remote it is suggested that specific measures be taken to promote the development of the chinese carbon trading market

transmission access and pricing with multiple separate energy forward markets california s congestion management protocols provide comparable access and prices to all users of the transmission system power exchange and bilateral contract parties the users implicitly bid for capacity on major transmission paths between zones the independent system operator iso allocates the available transmission capacity on these paths so that it maximizes the value of this capacity as measured by the users bids everyone scheduling flow on a congested path is charged the marginal cost based price for using the path the iso keeps each party s portfolio of generation and load individually in balance when adjusting schedules to relieve congestion on interzonal paths by keeping the portfolios of the different parties separate the iso clears its transmission market without arranging energy trades between parties parties are responsible for arranging their own trades the iso does not become involved in the energy forward markets

optimal design methodologies under the carbon emission trading program using mip ga sa and ts in this paper an adaptation of mip ga sa and ts to network planning under the carbon emission trading program is described and computational results are given as will be shown the results are very encouraging the cost function of this problem consists of the capital investment cost in discrete form the cost of transmission losses the power generation costs and carbon emission costs the optimization model has the ability to minimize the total costs and provides the best solutions which are both cost effective and environmentally friendly this method of solution is demonstrated on the real problem finally the performance of the proposed procedure is compared with that of the most well known as mixed integer programming

co2 emissions non renewable and renewable electricity production economic growth and international trade in italy abstract this paper applies the autoregressive distributed lag ardl bounds testing approach to cointegration to investigate the dynamic causal relationships between co2 emissions per capita real gdp per capita per capita non renewable electricity production and per capita renewable electricity production and international trade in the case of italy from 1960 to 2011 we find cointegration among these variables in the presence of possible structural breaks and we overcome the problem of multicollinearity in the research design the environmental kuznets curve ekc hypothesis is validated analytically because the estimated pollution model indicates that economic growth leads to less pollution over time per capita renewable electricity production reduces the level of co2 emissions per capita in the short run and in the long run whereas international trade only impacts positively upon carbon dioxide emissions per capita in the long run international trade granger causes co2 emissions per capita and non renewable electricity production per capita moreover the results depict the existence of the long run unidirectional granger causality relation running from output per capita to renewable electricity production per capita and from non renewable electricity production per capita to renewable electricity production per capita the findings indicate that renewable electricity production is a key solution in reducing pollutant emissions over time this result should be of concern to policy makers

integration of ccs emissions trading and volatilities of fuel prices into sustainable energy planning and its robust optimization in this paper a new approach has been proposed that allows a robust optimization of sustainable energy planning over a period of years it is based on the modified energy flow optimization model efom and minimizes total costs in planning capacities of power plants and ccs to be added stripped or retrofitted in the process it reduces risks due to a high volatility in fuel prices it also provides robustness against infeasibility with respect to meeting the required emission level by adopting a penalty constant that corresponds to the price level of emission allowances in this manner the proposed methodology enables decision makers to determine the optimal capacities of power plants and or ccs as well as volumes of emissions trading in the future that will meet the required emission level and satisfy energy demand from various user sections with minimum costs and maximum robustness they can also gain valuable insights on the effects that the price of emission allowances has on the competitiveness of res and ccs technologies it may be used in for example setting appropriate subsidies and tax policies for promoting greater use of these technologies the proposed methodology is applied to a case based on directions and volumes of energy flows in south korea during the year 2008

estimating the price of tradable permits for greenhouse gas emissions in 2008 12 abstract many attempts have been made recently to predict the prices of tradable permits for greenhouse gas ghg emissions in the first commitment period of the kyoto protocol 2008 12 in this paper we attempt to refine these price estimates based on i the results of economic models and identification of factors which influence prices but are not fully reflected in the models ii lessons from price forecasting experience in the us sulfur dioxide market and iii current price data from the nascent international market for ghg permits we expect ghg permit prices to be at the lower end of the broad spectrum of existing predictions this implies among other things that resource transfers to developing countries associated with emissions trading will be relatively low nevertheless even a modest price will have a significant influence on the decisions of consumers and investors in energy markets around the world

econometric analysis of australian emissions markets and electricity prices emissions trading schemes aim to reduce the emissions in certain pollutants using a market based scheme where participants can buy and sell permits for these emissions this paper analyses the efficiency of the two largest schemes in australia the nsw greenhouse gas abatement scheme and the mandatory renewable energy trading scheme through their effect on the electricity prices from 2004 to 2010 we use a long run structural modelling technique for the first time on this market it provides a practical long run approach to structural relationships which enable the determination of the effectiveness of the theoretical expectations of these schemes the generalised forecast error variance decomposition analysis finds that both schemes emissions prices have little effect on electricity prices generalised impulse response function analysis support this finding indicating that when shocks are applied to electricity by the two schemes it returns to equilibrium very quickly this indicates that these schemes are not having the effect anticipated in their legislation

impact of renewables deployment on the co2 price and the co2 emissions in the european electricity sector abstract as of 2005 electricity generators in europe operate under the european union emission trading system eu ets at the same time european member states have launched support mechanisms to stimulate the deployment of renewable electricity sources res e res e injections displace co 2 emissions within the sectors operating under the eu ets and they reduce the demand for european union allowances euas thereby reducing the eua price this paper presents the results of an ex post analysis to quantify the impact of res e deployment on the eua price and co 2 emissions in the western and southern european electricity sector during the period from 2007 to 2010 following from an operational partial equilibrium model of the electricity sector this study shows that the co 2 displacement from the electricity sector to other ets sectors due to res e deployment can be up to more than 10 of historical co 2 emissions in the electricity sector the eua price decrease caused by res e deployment turns out to be likely significant

emissions trading and abatement cost savings an estimation of china s thermal power industry this study evaluates the efficiency advantage of a market based emission permit trading policy instrument over a command and control policy instrument in the case of china s thermal power industry we estimate the unrealized gains achievable through emission permit trading with an optimization frontier analysis these unrealized gains include potential recoveries of electricity generation through eliminating spatial and temporal regulatory rigidity on emission permit trading the results of an ex post estimation during 2006 and 2010 indicate a potential gain of 8 48 increase in electricity generation if both the intra and inter period regulatory rigidities on co2 emission permits trading had been eliminated in addition if the permit trading systems for three air pollutions co2 so2 and nox had been completely integrated a positive net synergy effect of 1 43 increase in electricity generation could have been secured the unrealized gains identified in this study provide supports for establishing a nationwide emission permit trading system in china

detecting instability in the volatility of carbon prices this article investigates the presence of outliers in the volatility of carbon prices we compute three different measures of volatility for european union allowances based on daily data egarch model option prices implied volatility and intraday data realized volatility based on the methodology developed by zeileis et al 2003 and zeileis 2006 we detect instability in the volatility of carbon prices based on two kinds of tests retrospective tests ols recursive based cusum processes f statistics and residual sum of squares and forward looking tests by monitoring structural changes recursively or with moving estimates we show evidence of strong shifts mainly for the egarch and iv models during the time period overall we suggest that yearly compliance events and growing uncertainties in post kyoto international agreements may explain the instability in the volatility of carbon prices

an empirical analysis of energy cost pass through to co2 emission prices abstract we use the nonlinear autoregressive distributed lag nardl model to analyze the asymmetric and nonlinear pass through effects of changes in crude oil prices natural gas prices coal prices and electricity prices on the co 2 emission allowance prices we find that i the crude oil prices have a long run negative and asymmetric effect on the co 2 allowance prices ii the decreases in the coal prices have a stronger impact on the carbon prices in the short run than the increases iii the natural gas prices and electricity prices have a symmetric effect on the carbon prices but this effect is negative for the former and positive for the latter these findings are robust when using both monthly and daily data and when considering bivariate and multivariate models

frameworks for pricing greenhouse gas emissions and the policy objectives they promote abstract four cost effective frameworks for pricing greenhouse gas emissions currently receive widespread attention cap and trade emission fees and hybrid cap and trade approaches that include upper or lower limits on permit prices price ceilings or floors this paper develops a fifth framework that uses an emission fee with an upper limit on the quantity of emissions a quantity ceiling and compares the impact of each framework on emission prices and quantities cap and trade with a price ceiling minimizes price increases for emitting activities in all cases whereas an emission fee with a quantity ceiling maximizes emissions reductions thus the choice of framework influences policy outcomes because each framework is more or less suited to particular policy goals whether pursuing one potential policy goal serves society s interests best depends on the eventual consequences of climate damage and emissions pricing which are uncertain when policy choices are made policy updating over time may reduce but likely cannot entirely eliminate the differences in outcome that arise due to framework choice therefore the best framework for emissions pricing depends on subjective preferences regarding the relative importance of different policy objectives most notably whether one is more risk averse to climate damages or emissions price increases

the impact of chinese carbon emission trading scheme ets on low carbon energy lce investment china is planning to introduce emission trading scheme ets to decrease co2 emission as low carbon energy lce will play a pivotal role in reducing co2 emissions our paper is to assess the extent and the conditions under which a carbon ets can deliver lce investment in china we chose wind technology as a case study and a real option based model was built to explore the impact of a number of variables and design features on investment decisions e g carbon and electricity price carbon market risk carbon price floor and ceiling and on grid ratio we compute critical values of these variables and features and explore trade offs among them according to our work a carbon ets has a significant effect on wind power plant investment although it cannot support investment in wind power on its own carbon price stabilization mechanisms such as carbon price floor can significantly improve the effect of carbon ets but the critical floor to support investment is still much higher than the carbon price in china pilot etss our results show that other policy measures will be needed to promote low carbon energy development in china

dynamic analysis on market structure of china s coal industry abstract according to industrial organization theory market structure is a crucial factor to market performance based on the var model and the data from 1994 to 2014 we revealed the dynamic response route of the market structure to these factors and the change process of contribution rate of these factors to the market structure it shows that market structure is inertial adjustment technology advance and industry policy have continuous effects on improvement of market concentration ratio market size and production scale have sustained negative effects on market concentration ratio fixed capital has barrier effect which is mainly the entry barrier effect at the beginning and then the exit barrier effect continues to play a leading role therefore the government has no need to introduce special policies to encourage merger or expansion on the capacity as enterprises would do it spontaneously it is necessary to make market access system stricter to improve exit compensation mechanism and to promote technological innovation all these policies need dynamic adjustment based on the stages of economic cycle

risk spillover of international crude oil to china s firms evidence from granger causality across quantile abstract this paper investigates the extreme risk spillover of international crude oil to stock returns for 529 firms listed on the a share market of the shanghai stock exchange we apply a kernel based nonparametric method to test quantile on quantile granger causality from crude oil to firm returns from the perspective of firm level analysis the findings are outlined as follows first our empirical results provide strong evidence to suggest the asymmetry in the linkage of extreme movements from crude oil to firm returns that is the case of positive risk spillovers are more severe than the case of negative risk spillovers in particular the down to down risk spillover is the most serious case this phenomenon unravels the strong driving force of economic cycles second risk transmission from oil price shocks to firm returns depends on the firm s industry features in addition to the usual focus on inter industry difference we also note the within industry heterogeneity third we confirm that china s refined oil pricing reform of march 27 2013 has had intensifying effects on the negative spillovers from oil prices to firms for investors we emphasize not only the awareness of the predictive power between extreme risks from international crude oil to china s firms but also the existence of heterogeneity in these predictive abilities across firms

price drivers and structural breaks in european carbon prices 2005 2007 this article aims at characterizing the daily price fundamentals of european union allowances euas traded since 2005 as part of the emissions trading scheme ets the presence of two structural changes on april 2006 following the disclosure of 2005 verified emissions and on october 2006 following the european commission announcement of stricter phase ii allocation allows to isolate distinct fundamentals evolving overtime the results extend previous literature by showing that eua spot prices react not only to energy prices with forecast errors but also to unanticipated temperatures changes during colder events besides the sub period decomposition of the pilot phase gives a better grasp of institutional and market events that drive allowance price changes

the influence of real output renewable and non renewable energy trade and financial development on carbon emissions in the top renewable energy countries due to tremendous increase in the level of carbon dioxide co2 emissions in the last several decades a number of studies in the energy growth environment literature have attempted to identify the determinants of co2 emissions a major criticism related to the existing studies we realize is the selection of panel estimation techniques almost all studies use panel methods that ignore the issue of cross sectional dependence even though countries in the panel are most likely heterogeneous and cross sectionally dependent in addition the majority of existing studies use aggregate energy consumption and thus fail to identify the impacts of energy consumption by sources on the environment in order to fulfill the mentioned gaps in the literature this empirical study analyzes the influence of the real income renewable energy consumption non renewable energy consumption trade openness and financial development on co2 emissions in the ekc model for the top countries listed in the renewable energy country attractiveness index by employing heterogeneous panel estimation techniques with cross section dependence we find that the analyzed variables become stationary at their first differences by using the cadf and the cips unit root tests and the analyzed variables are cointegrated by employing the lm bootstrap cointegration test by using the fmols and the dols we also find that increases in renewable energy consumption trade openness and financial development decrease carbon emissions while increases in non renewable energy consumption contribute to the level of emissions and the ekc hypothesis is supported for the top renewable energy countries

pricing energy and ancillary services in integrated market systems by an optimal power flow a detailed ac opf based formulation for procuring pricing and settling energy and ancillary service in simultaneous auctions by integrated market systems is presented the paper provides clear definitions of locational marginal prices for energy and ancillary service marginal prices in terms of lagrange multipliers the characteristics of the prices are analyzed especially when economic substitution among ancillary services is required the paper also evaluates the conditions under which opportunity costs are incurred to units that provide ancillary services it is particularly shown that the intuitive belief that the provision of regulation down service does not incur opportunity cost to the provider in general is not true

influences from the european parliament on eu emissions prices abstract the decisions of the european parliament ep are shown to influence both eu emission allowance eua prices and volatility reductions in price and increases in volatility are observed when ep decisions are i not party political in origin ii made during times of low market sentiment or iii made during times of low market attention 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 this aims to reduce the evident ongoing uncertainty experienced by traders around each decision made by the ep the finding that sentiment and market attention at the time of an ep decision influences the market s reaction indicates 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 some form of medium term forward guidance may be called for

on the causal dynamics between economic growth renewable energy consumption co2 emissions and trade openness fresh evidence from brics countries abstract the current study investigates the causal relationship between economic growth and renewable energy consumption in the brics countries over the period 1971 2010 within a multivariate framework the ardl bounds testing approach to cointegration and vector error correction model vecm are used to examine the long run and causal relationships between economic growth renewable energy consumption trade openness and carbon dioxide emissions empirical evidence shows that based on the ardl estimates there exist long run equilibrium relationships among the competing variables regarding the vecm results bi directional granger causality exists between economic growth and renewable energy consumption suggesting the feedback hypothesis which can explain the role of renewable energy in stimulating economic growth in brics countries

natural gas pricing reform in china getting closer to a market system the authros are thankful to industry representatives in china shell cnpc for their valuable contribution regarding natural gas information the mit joint program on the science and policy of global change where the authors are affiliated is supported by the u s department of energy office of science under grants de fg02 94er61937 de fg02 08er64597 de fg02 93er61677 de sc0003906 de sc0007114 xeu 0 9920 01 the u s department of energy oak ridge national laboratory under subcontract 4000109855 the u s environmental protection agency under grants xa 83240101 pi 83412601 0 rd 83427901 0 xa 83505101 0 xa 83600001 1 and subcontract uta12 000624 the u s national science foundation under grants ags 0944121 efri 0835414 iis 1028163 eccs 1128147 arc 1203526 ef 1137306 ags 1216707 and ses 0825915 the u s national aeronautics and space administration under grants nnx06ac30a nnx07ai49g nnx11an72g and sub agreement no 08 sfws 209365 mit the u s federal aviation administration under grants 06 c ne mit 09 c ne mit agmt no 4103 30368 the u s department of transportation under grant dtrt57 10 c 10015 the electric power research institute under grant ep p32616 c15124 ep p8154 c4106 the u s department of agriculture under grant 58 6000 2 0099 58 0111 9 001 and a consortium of 35 industrial and foundation sponsors for the complete list see http globalchange mit edu sponsors all

economic growth energy consumption financial development international trade and co2 emissions in indonesia this study examines the linkages among economic growth energy consumption financial development trade openness and co2 emissions over the period of 1975q1 2011q4 in the case of indonesia the stationary analysis is performed by using zivot andrews structural break unit root test and the ardl bounds testing approach for a long run relationship between the series in the presence of structural breaks the causal relation between the concerned variable is examined by the vecm granger causality technique and robustness of causal analysis is tested by innovative accounting approach iaa our results confirm that the variables are cointegrated it means that the long run relationship exists in the presence of structural break stemming in the series the empirical findings indicate that economic growth and energy consumption increases co2 emissions while financial development and trade openness compact it the vecm causality analysis has shown the feedback hypothesis between energy consumption and co2 emissions economic growth and co2 emissions are also interrelated i e bidirectional causality financial development granger causes co2 emissions the study opens up a new policy insights to control the environment from degradation by using energy efficient technologies financial development and trade openness can also play their role in improving the environmental quality

the emergence and evolution of regional convergence clusters in china s energy markets employing the new regression tests for convergence club convergence and clustering proposed by phillips and sul 2007 this paper models and analyses the behaviour of china s energy sectors energy market convergence clusters are identified using new price data and their regional spatial distributions are mapped for four major fuel types coal gasoline diesel and electricity the findings are as follows i as yet there are no fully integrated national energy markets in china as more than one convergence cluster is identified for all four fuels ii some regional energy markets can be regarded as quite mature as evidenced by the existence of some highly concentrated convergence clusters connected geographically iii some regional markets remain in a state of transition as witnessed by convergence clusters that are scattered geographically and that are growing in membership iv it seems that there is more regional based integration for coal and electricity than for gasoline and diesel as more convergent clusters were identified for coal and electricity than for gasoline and diesel and v overall china still appears to be in the process of energy market integration as demonstrated by the number and evolution of convergence clusters over time

incentives and prices in an emissions trading scheme with updating abstract emissions trading schemes where allocations are based on updated baseline emissions give firms less incentive to reduce emissions for a given quota or allowance price nevertheless according to bohringer and lange on the design of optimal grandfathering schemes for emission allowances europ econ rev 49 2005 2041 2055 such allocation schemes are cost effective if the system is closed and allocation rules are identical across firms in this paper we show that the cost effective solution may be infeasible if marginal abatement costs grow too fast moreover if a price cap or banking borrowing is introduced the abatement profile is no longer the same as in the case with an auction or lump sum allocation in addition we show that with allocation based on updated emissions the quota price will always exceed marginal abatement costs possibly misguiding policy makers and investors about abatement costs numerical simulations indicate that the quota price most likely will be several times higher than marginal abatement costs unless a significant share of allowances is auctioned

designing an emissions trading scheme for china with a dynamic computable general equilibrium model abstract to fulfill its copenhagen pledges to control carbon emissions and mitigate climate change china plans to establish a nationwide emissions trading scheme ets in 2016 this paper develops a multi sector dynamic computable general equilibrium model with an ets module to study the appropriate ets policy design including a carbon cap permit allocation and supplementary policies e g penalty policies and subsidy policies the main results are as follows 1 to achieve china s copenhagen pledge the equilibrium nationwide carbon price is observed to be between 36 and 40 rmb yuan per metric ton 2 the ets policy has a cost effective mitigation effect by improving china s production and energy structures with relatively little economic harm 3 various ets sub policies should be carefully designed to balance economic growth and carbon mitigation in particular the carbon cap should be set according to china s copenhagen pledge a relatively large distribution ratio of free permits the output based grandfathering rule for free permits a penalty price on illegitimate emissions slightly above the carbon price and a sufficient subsidy from ets revenue are strongly recommended in the early stages to avoid significant economic loss these designs can be adjusted in later stages to enhance the mitigation effect

carbon price drivers phase i versus phase ii equilibrium abstract the aim of this paper is to investigate the determinants of the carbon price during the two phases of the european union emission trading scheme eu ets more specifically relying on daily eu allowance futures contracts we test whether the carbon price drivers identified for phase i still hold for phase ii and evolve toward a long run relationship using cointegration techniques and accounting for the 2006 structural break in the carbon market we show that while a cointegrating relationship exists for both phases of the eu ets the nature of this equilibrium relationship is different across the two subperiods with an increasing role of fundamentals in phase ii deriving equilibrium values we show that the carbon price tends to be undervalued since the end of 2009

modeling the price dynamics of co2 emission allowances abstract in this paper we analyze the short term spot price behavior of carbon dioxide co 2 emission allowances of the new eu wide co 2 emissions trading system eu ets after reviewing the stylized facts of this new class of assets we investigate several approaches for modeling the returns of emission allowances due to different phases of price and volatility behavior in the returns we suggest the use of markov switching and ar garch models for stochastic modeling we examine the approaches by conducting an in sample and out of sample forecasting analysis and by comparing the results to alternative approaches our findings strongly support the adequacy of the models capturing characteristics like skewness excess kurtosis and in particular different phases of volatility behavior in the returns

cross border electricity market effects due to price caps in an emission trading system an agent based approach the recent low co2 prices in the european union emission trading scheme eu ets have triggered a discussion whether the eu ets needs to be adjusted we study the effects of co2 price floors and a price ceiling on the dynamic investment pathway of two interlinked electricity markets loosely based on great britain which already has introduced a price floor and on central western europe using an agent based electricity market simulation with endogenous investment and a co2 market including banking we analyse the cross border effects of national policies as well as system wide policy options a common moderate co2 auction reserve price results in a more continuous decarbonisation pathway this reduces co2 price volatility and the occurrence of carbon shortage price periods as well as the average cost to consumers a price ceiling can shield consumers from extreme price shocks these price restrictions do not cause a large risk of an overall emissions overshoot in the long run a national price floor lowers the cost to consumers in the other zone the larger the zone with the price floor the stronger the effect price floors that are too high lead to inefficiencies in investment choices and to higher consumer costs

modeling persistence of carbon emission allowance prices this study reexamines the issue of persistence in carbon emission allowance spot prices using daily data and covering the period from 28 2 2007 to 14 05 2014 for this purpose we use techniques based on the concept of long memory accounting for structural breaks and non linearities in the data with both of these aspects potentially affecting the degree of persistence our results indicate that while there is no evidence of non linearity when allowing for structural breaks persistence of shocks to the carbon emission allowance is markedly reduced with the same being transitory in nature for recent sub samples

measuring network systemic risk contributions a leave one out approach abstract the aim of this paper is to propose a new network measure of systemic risk contributions that combines the pair wise granger causality approach with the leave one out concept this measure is based on a conditional granger causality test and consists of measuring how far the proportion of statistically significant connections in the system breaks down when a given financial institution is excluded we analyse the performance of our measure of systemic risk by considering a sample of the largest banks worldwide over the 2003 2018 period we obtain three important results first we show that our measure is able to identify a large number of banks classified as global systemically important banks g sibs by the financial stability board fsb second we find that our measure is a robust and statistically significant early warning indicator of downside returns during the last financial crisis finally we investigate the potential determinants of our measure of systemic risk and find similar results to the existing literature in particular our empirical results suggest that the size and the business model of banks are significant drivers of systemic risk

time variation in european carbon pass through rates in electricity futures prices the european union emissions trading scheme is a means to price emission allowances electricity market prices should reflect these market prices of emission allowances as they are a cost factor for power producers the pass through rate is the fraction of the emission allowance price that is passed through to electricity market prices it is often measured and presented as an average or a fixed estimate over some time period however we expect that the pass through rates should actually vary over time as electricity supply curves reflect the marginal costs of different producers that differ in emission intensity we apply a kalman filter approach to observe pass through rates in germany and u k and find strong support for time varying instead of fixed pass through rates although policy makers are interested in the impact of a policy on average our results indicate that one needs to be careful with the time frame over which pass through rates are measured for policy evaluation as an incorrect chosen evaluation period could cause an under or overestimation of the pass through rate in addition our model helps to provide policy makers with insight in the development of pass through rates when market circumstances change with respect to power production

first evidence of asymmetric cost pass through of eu emissions allowances examining wholesale electricity prices in germany abstract we test the hypothesis that rising prices of emission allowances have a stronger impact on wholesale electricity prices than falling prices asymmetric cost pass through using an autoregressive distributed lag model we confirm this hypothesis for the german market

factors affecting the carbon allowance market in the us the us carbon allowance market has different characteristic and price determination process from the eu ets market since emitting installations voluntarily participate in emission trading scheme this paper examines factors affecting the us carbon allowance market an autoregressive distributed lag model is used to examine the short and long run relationships between the us carbon allowance market and its determinant factors in the long run the price of coal is a main factor in the determination of carbon allowance trading in the short run on the other hand the changes in crude oil and natural gas prices as well as coal price have significant effects on carbon allowance market

analysis of thermal coal pricing and the coal price distortion in china from the perspective of market forces abstract the price of thermal coal has always been the focus of the debate between coal mining industry and electric power industry the thermal coal price is always lower than other same quality coal and this phenomenon of thermal coal price distortion has been existing in china for a long time the distortion coal price can not reflect the external cost and the resource scarcity of coal which could result in environment deteriorating and inefficient resource allocation this paper studied the phenomenon of thermal coal price distortion through economic theoretical modeling and empirical cointegration analysis from the perspective of market forces the results show that thermal coal price is determined by electricity price the prediction elasticity of a electricity enterprise price elasticity of demand of electricity the input prediction elasticity of a electricity enterprise and the price elasticity of supply of thermal coal the main reason of coal price distortion is the unbalance market force of coal industry and thermal coal generation industry the distortion rate of coal price is positively related to the market force of electric power industry and negatively related to the industrial concentration of coal industry

policy interactions risk and price formation in carbon markets carbon pricing is an important mechanism for providing companies with incentives to invest in carbon abatement price formation in carbon markets involves a complex interplay between policy targets dynamic technology costs and market rules carbon pricing may under deliver investment due to r d externalities requiring additional policies which themselves affect market prices also abatement costs depend on the extent of technology deployment due to learning by doing this paper introduces an analytical framework based on marginal abatement cost mac curves with the aim of providing an intuitive understanding of the key dynamics and risk factors in carbon markets the framework extends the usual static mac representation of the market to incorporate policy interactions and some technology cost dynamics the analysis indicates that supporting large scale deployment of mature abatement technologies suppresses the marginal cost of abatement sometimes to zero whilst increasing total abatement costs however support for early stage r d may reduce both total abatement cost and carbon price risk an important aspect of the analysis is in elevating risk management considerations into energy policy formation as the results of the stochastic modelling indicate wide distributions for the emergence of carbon prices and public costs around the policy expectations

stock prices of clean energy firms oil and carbon markets a vector autoregressive analysis recent discussions of energy security and climate change have attracted significant attention to clean energy we hypothesize that rising prices of conventional energy and or placement of a price on carbon emissions would encourage investments in clean energy firms the data from three clean energy indices show that oil prices and technology stock prices separately affect the stock prices of clean energy firms however the data fail to demonstrate a significant relationship between carbon prices and the stock prices of the firms

the dynamic linkage effect between energy and emissions allowances price for regional emissions trading scheme pilots in china abstract china s emissions trading scheme cets pilots are emerging and fragmented markets these emissions allowances markets may exhibit a different fundamental price process from the european union s eu and the united states us emissions trading scheme ets the dynamic linkage effects between energy and emissions allowances prices are investigated for regional ets pilots in china using cointegration techniques the empirical results confirm that in the long run coal oil and natural gas prices are the main determinant factors of regional emissions allowances prices except for the second phase beijing ets pilots however their long run cointegration relationships in the beijing and shanghai pilots are not exactly in line with the guangdong and hubei pilots in the short run the changes in oil and natural gas prices in the second phase beijing ets pilot the natural gas prices in the shanghai ets pilot and the coal prices in the hubei ets pilot are found to have significant effects on regional emissions allowances prices in china finally regional energy pricing inefficiency regional emissions trading market overreaction and their inefficient fundaments may provide major obstacles in reducing the effectiveness of the fossil energy price pass through to emissions allowances prices in regional ets pilots

china s coal price disturbances observations explanations and implications for global energy economies since china decontrolled coal prices its coal price has risen steadily and been unusually volatile in 2011 in particular high coal prices and capped electricity prices in china discouraged coal fired power generation triggering widespread power shortages we suggest that these coal price disturbances could be symptomatic of a major change in pricing dynamics of global fossil fuel markets with increasing correspondence between coal and oil prices globally historically global coal prices have been more stable and lower than oil and natural gas prices on a per heat basis in recent years however coal prices have been increasingly volatile worldwide and have tracked other fossil fuel prices more closely meanwhile the recent development of unconventional gas has substantially decoupled us natural gas and oil prices technically low us natural gas prices with potential fuel switching could drive us domestic coal prices lower however this effect is unlikely to counteract the overall trend in increasing coal consumption globally china s market size and unique partially controlled energy system make its reform agenda a key force in the global economy policymakers in the us e u and elsewhere should monitor china s economic reform agenda to anticipate and respond to changes accompanying china s increasing importance in the global energy economy

econometric analysis of trade exports imports energy consumption and co2 emission in six regions abstract the aim of this study is to explore the bi directional long run relationship between trade energy consumption trade co 2 emission exports energy consumption exports co 2 emission imports energy consumption and imports co 2 emission 189 countries from six different regions namely asia pacific eastern europe the americas middle east and north africa mena sub saharan africa ssa and western europe were selected the panel fully modified ols fmols was utilized taking the period of 1990 2011 the panel results show that all the regions excluding eastern europe show a long run positive relationship between the trade variables energy consumption and between the trade variable co 2 emission however at the country level the results reveal that the feedback long run positive relationship between the trade variables energy consumption and co 2 emission takes place in most cases when the share of trade of goods and services to gdp is significant and the level of the countries development is high however the negative or the non significant long run relationship between the variables takes place generally in countries when the trade variables do not play a large share in their gdp and when these countries are in early development stages

a nonparametric test for granger causality in distribution with application to financial contagion this article introduces a kernel based nonparametric inferential procedure to test for granger causality in distribution this test is a multivariate extension of the kernel based granger causality test in tail event the main advantage of this test is its ability to examine a large number of lags with higher order lags discounted in addition our test is highly flexible because it can be used to identify granger causality in specific regions on the distribution supports such as the center or tails we prove that the test converges asymptotically to a standard gaussian distribution under the null hypothesis and thus is free of parameter estimation uncertainty monte carlo simulations illustrate the excellent small sample size and power properties of the test this new test is applied to a set of european stock markets to analyze spillovers during the recent european crisis and to distinguish contagion from interdependence effects

impacts of increasing renewable energy subsidies and phasing out fossil fuel subsidies in china abstract subsidies to fossil fuel consumption have made china s energy system fragile and unsustainable it is necessary for china to reform fossil fuel subsidies and reflect the resource cost and environmental cost in energy prices considering the life cycle external costs this paper estimates the scale of fossil fuel subsidy and the true cost of renewable energy in 2010 and evaluates impacts of increasing renewable energy subsidies and phasing out fossil fuel subsidies on macro economy and energy system in china based on scenario analysis simulation results show that the negative impacts on economic growth can be reduced from 4 460 to 0 432 if only 10 of fossil fuel subsidies were removed increasing subsidies for renewable energy has positive impacts on macroeconomic variables although the economic benefits per unit of subsidies for renewable energy are lower than those for fossil fuels by 0 06 0 19 cny the revenue gap can be narrowed by shifting more subsidies from fossil fuels to renewables increasing subsidies for renewable energy helps optimize china s energy system in three ways the first is making energy consumption structure cleaner the second is improving energy efficiency and the third is addressing the problem of imbalanced distribution and consumption of energy

the impact of electricity demand reduction policies on the eu ets modelling electricity and carbon prices and the effect on industrial competitiveness the european electricity market is linked to a carbon market with a fixed cap that limits greenhouse gas emissions at the same time a number of energy efficiency policy instruments in the eu aim at reducing the electricity consumption this article explores the interactions between the eu s carbon market on the one hand and instruments specifically targeted towards energy end use efficiency on the other hand our theoretical analysis shows how electricity demand reduction triggered by energy efficiency policy instruments affects the emission trading scheme without adjustments of the fixed cap decreasing electricity demand relative to business as usual reduces the carbon price without reducing total emissions with lower carbon prices costly low emission processes will be substituted by cheaper high emitting processes possible electricity and carbon price effects of electricity demand reduction scenarios under various carbon caps are quantified with a long term electricity market simulation model the results show that electricity efficiency policies allow for a significant reduction of the carbon cap compared to the 2005 emission level 30 emission reductions can be achieved by 2020 within the emission trading scheme with similar or even lower costs for the industrial sector than were expected when the cap was initially set for a 21 emission reduction

framework for energy brokerage system with reserve margin and transmission losses the power industry in the united states is presently participating in a changing business environment while planning to meet future peak demand is still a concern the efficient utilization of existing generation and transmission resources is fast becoming of primary interest this interest suggests to move from cost based market operations to price based market operations in such a business environment a need for a mechanism to determine the pricing of various ancillary services is desired as the ancillary services go together with electrical power transfer the proposed approach develops a novel method of pricing mechanism for reserve margins and transmission losses as a part of the overall transaction in an energy brokerage system the brokerage model described in this paper is based on formulations using linear programming

asset market linkages in crisis periods we characterize asset return linkages during periods of stress by an extremal dependence measure contrary to correlation analysis this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships our estimates for the g 5 countries suggest that simultaneous crashes between stock markets are much more likely than between bond markets however for the assessment of financial system stability the widely disregarded cross asset perspective is particularly important for example our data show that stock bond contagion is approximately as frequent as flight to quality from stocks into bonds extreme cross border linkages are surprisingly similar to national linkages illustrating a potential downside to international financial integration

caviar conditional autoregressive value at risk by regression quantiles value at risk var has become the standard measure of market risk employed by financial institutions for both internal and regulatory purposes var is defined as the value that a portfolio will lose with a given probability over a certain time horizon usually one or ten days despite its conceptual simplicity its measurement is a very challenging statistical problem and none of the methodologies developed so far give satisfactory solutions interpreting the var as the quantile of future portfolio values conditional on current information we propose a new approach to quantile estimation which does not require any of the extreme assumptions invoked by existing methodologies such as normality or i i d returns the conditional autoregressive value at risk or caviar model moves the focus of attention from the distribution of returns directly to the behavior of the quantile we specify the evolution of the quantile over time using a special type of autoregressive process and use the regression quantile framework introduced by koenker and bassett to determine the unknown parameters since the objective function is not differentiable we use a differential evolutionary genetic algorithm for the numerical optimization utilizing the criterion that each period the probability of exceeding the var must be independent of all the past information we introduce a new test of model adequacy the dynamic quantile test applications to simulated and real data provide empirical support to this methodology and illustrate the ability of these algorithms to adapt to new risk environments

energy prices and co2 emission allowance prices a quantile regression approach we use a quantile regression framework to investigate the impact of changes in crude oil prices natural gas prices coal prices and electricity prices on the distribution of the co2 emission allowance prices in the united states we find that i an increase in the crude oil price generates a substantial drop in the carbon prices when the latter is very high ii changes in the natural gas prices have a negative effect on the carbon prices when they are very low but have a positive effect when they are quite high iii the impact of the changes in the electricity prices on the carbon prices can be positive in the right tail of the distribution and iv the coal prices exert a negative effect on the carbon prices