price determination in the eu ets market theory and econometric analysis with market fundamentals abstract we investigate the price determination of the european union emission allowance eua of the european union emissions trading scheme eu ets we postulate an uncertain permit price and risk averse firms which have the possibility to hedge in the forward market the firms produce final goods abate their emissions and trade permits in the permit market the dependence of the equilibrium permit price on exogenous variables is studied in a permit market model we test our theoretical findings with empirical data from 2005 to 2010 in the eu ets market we use daily forward prices of eua as our dependent variable we use several econometric models with multiple stationary time series to discover that there is a strong relationship between the fundamentals such as german electricity prices and gas and coal prices with the price of eua we find that the eua forward price depends on fundamentals especially on the price of electricity as well as on the gas coal difference in a statistically significant way

role of carbon swap trading and energy prices in price correlations and volatilities between carbon markets the present paper theoretically and empirically examines the role of carbon swap trading and energy prices in volatilities and price correlations between the eu and kyoto protocol emissions trading schemes a supply and demand based correlation model between eua and scer price returns is proposed in detail using inverse box cox type marginal abatement cost mac curves and simple emission reduction volume processes the model includes financial players eua scer swap transaction in boom periods of carbon prices using the logit model for eua and eua scer swap volume correlations and stronger energy price impacts on eua prices than scer prices using a mean reverting lognormal process for energy prices the empirical studies using eua and scer prices estimate the model parameters resulting in a positive eua volume impact on eua scer swap transactions and a positive energy price impact on eua prices it is shown that high eua scer price correlations during high eua price periods stemmed from eua scer swap transactions whereas high eua scer price correlations during the period of financial turmoil with low eua prices came from the drop in energy prices we also show that the leverage effects often observed in security markets exist in both the eua and scer markets according to the price volatility relation

intertemporal emission permits trading under uncertainty and irreversibility this paper analyzes the effect of emission permit banking on clean technology investment and abatement under conditions where the stringency of the future cap is uncertain we examine the problem of heterogeneous firms minimizing the cost of intertemporal emission control in the presence of stochastic future pollution standards and emission permits that are tradable across firms and through time a firm can invest in clean capital an improved pollution abatement technology to reduce its abatement cost we consider two possibilities that investment is reversible or irreversible uncertainty is captured within a two period model only the current period cap is known we show that if banking is positive and marginal abatement costs are sufficiently convex there will be more abatement and investment in clean technology under uncertainty than there would be under certainty and no banking these results are at odds with the common belief that uncertainty on future environmental policy is a barrier to investment in clean capital moreover under uncertainty and irreversibility we find that there are cases where banking enables firms to invest more in clean capital

market power in emission permit markets theory and evidence from the eu ets a well known result about market power in emission permit markets is that efficiency can be achieved by full free allocation to the dominant firm i show that this result breaks down when taking the interaction between input and output markets into account even if the dominant firm perceives market power in the permit market alone i then examine the empirical evidence for price manipulation by the ten largest electricity firms during phase i of the eu ets i find that some firms excess allowance holdings are consistent with strategic price manipulation and that they cannot be explained by price speculation or by precautionary purchases to insure against uncertain future emissions my results suggest that market power is likely to be an empirically relevant concern during the early years of emission permit markets

industrial energy substitution during the 1980s in the greek economy abstract factor substitution in greek manufacturing during the 1980s is examined using pooled data in static and dynamic translog expenditure share models inputs are capital labor electricity and non electrical energy liquid solid gas own price elasticities for capital and labor are inelastic but for electricity more elastic 0 90 results indicate substitutability among factors in the short run in the long run electricity and capital are complements as are labor and non electrical energy greek manufacturing is predicted to continue decreased consumption of liquid fuels to the year 2000 continuing the electrification begun in the 1970s

what explains the short term dynamics of the prices of co2 emissions using the vector auto regression var and the vector error correction models vecm this paper analyzes the short term dynamics of the prices of co2 emissions in response to changes in the prices of oil coal natural gas electricity and carbon emission allowances the results show that i a positive shock to the crude oil prices has a negative effect on the co2 allowance prices ii an unexpected increase in the natural gas prices raises the price of co2 emissions iii a positive shock to the prices of the fuel of choice coal has virtually no significant impact on the co2 prices iv there is a clear positive effect of the coal prices on the co2 allowance prices when the electricity prices are excluded from the var system and v a positive shock to the electricity prices reduces the price of the co2 allowances we also find that the energy price shocks have a persistent impact on the co2 allowance prices with the largest effect occurring six months after a shock strikes the effect is particularly strong in the case of the natural gas price shocks additionally we estimate that it takes between 7 3 and 9 6 months to halve the gap between the actual and the equilibrium prices of the co2 allowances i e to erase any price over or undervaluations after a shock strikes finally the empirical findings suggest an important degree of substitution between the three primary sources of energy i e crude oil natural gas and coal particularly when electricity prices are excluded from the var system

equilibrium price dynamics of emission permits this article presents a stochastic equilibrium model for environmental markets that allows us to study the characteristic properties of emission permit prices induced by the design of today s cap and trade systems we characterize emission permits as highly nonlinear contingent claims on economy wide emissions and reveal their hybrid nature between investment and consumption assets our model makes predictions about the dynamics and volatility structure of emission permit prices the forward price curve and the implications for option pricing in this market empirical evidence from existing emissions markets shows that the model explains the stylized facts of emission permit prices and related derivatives

carbon trading thickness and market efficiency abstract this note tests for the efficient market hypothesis emh in the market for co 2 emission allowances in phase i and phase ii of the european union emissions trading scheme eu ets as usually is the case in emerging and non competitive markets such as the eu ets trading often not occurs on a frequent basis this has adverse implications for both the gains from permit trade as well as biases the emh tests variance ratio tests are employed to adjust for the thin trading effect the results indicate that phase i the trial and learning period was inefficient whereas the first period under phase ii shows signs of restoring market efficiency

a model for energy pricing with stochastic emission costs we use a supply demand approach to value energy products exposed to emission cost uncertainty we find closed form solutions for a number of popularly traded energy derivatives such as forwards european call options written on spot prices and european call options written on forward contracts our modeling approach is to first construct noisy supply and demand processes and then equate them to find an equilibrium price this approach is very general while still allowing for sensitivity analysis within a valuation setting our assumption is that in the presence of emission costs traditional supply growth will slow down causing output prices of energy products to become more costly over time however emission costs do not immediately cause output price appreciation but instead expose individual projects particularly those with high emission outputs to much more extreme risks through the cost side of their profit stream our results have implications for hedging and pricing for producers operating in areas facing a stochastic emission cost environment

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

on the stochastic properties of carbon futures prices pricing carbon is a central concern in environmental economics due to the worldwide importance of emissions trading schemes to regulate pollution this paper documents the presence of small and large jumps in the stochastic process of the co 2 futures price the large jumps have a discrete origin i e they can arise from various demand factors or institutional decisions on the tradable permits market contrary to the existing literature we show that the stochastic process of carbon futures prices does not contain a continuous component brownian motion the results are derived by using high frequency data in the activity signature function framework todorov and tauchen in j econom 154 125 138 2010 todorov and tauchen in j bus econ stat 29 356 371 2011 the implication is that the carbon futures price should be modeled as an appropriately sampled centered levy or poisson process the pure jump behavior of the carbon price might be explained by the lower volume of trades on this allowance market compared to other highly liquid financial markets

smart srec a stochastic model of the new jersey solar renewable energy certificate market markets for solar renewable energy certificates srecs are gaining in promi nence in many states stimulating growth of the u s solar industry however srec market prices have been extremely volatile causing high risk to participants and potentially less investment in solar power generation such concerns necessitate the development of realis tic flexible and tractable models of srec prices that capture the behavior of participants given the rules that govern the market we propose an original stochastic model called smart srec to fill this role building on established ideas from the carbon pricing liter ature and including a feedback mechanism for generation response to prices we calibrate the model to the new jersey market and backtest it analyzing parameter sensitivity and demonstrating its ability to reproduce historical dynamics finally we run simulations to investigate the role and impact of regulatory parameters thus providing insight into the crucial role played by market design

the economics of pollution permit banking in the context of title iv of the 1990 clean air act amendments abstract this paper presents a model of the collective emission permit banking behavior of electricity generating units affected by title iv of the clean air act amendments of 1990 a rigorous treatment of the constraint that pollution permits cannot be borrowed from future allocations is introduced this approach enables an analysis of the impact of future changes in electricity demand regulations and technologies on the present permit price and emissions level the effect of uncertainty on the banking behavior is also explored

intertemporal links in cap and trade schemes in a two period general equilibrium model i study the effects of intertemporal emission permit trading in a cap and trade scheme when firms investments in abatement have long term effects to meet their caps firms optimally choose levels of trading and investment in each period by equalizing the marginal benefit of abatement to the marginal cost of abatement in each period the fact that investments have long term effects introduces new effects investments in period 1 have both an additional benefit the reduction of emissions in period 2 and an additional cost the decrease in abatement opportunities in period 2 this changes the standard condition of equalization of marginal costs across periods for cost effectiveness without intertemporal trading some investments in period 1 are entirely driven by second period abatement needs in that case allowing intertemporal trading may reduce investment in period 1 as some long term investments are substituted by intertemporal permit trading descriptive evidence from the eu emissions trading system ets illustrates this potential effect

modeling co2 emission allowance prices and derivatives evidence from the european trading scheme this paper studies the three main markets for emission allowances within the european union emissions trading scheme eu ets powernext nord pool and european climate exchange ecx the analysis suggests that the prohibition of banking of emission allowances between distinct phases of the eu ets has significant implications in terms of futures pricing motivated by these findings we develop an empirically and theoretically valid framework for the pricing and hedging of intra phase and inter phase futures and options on futures respectively

a model of intertemporal emission trading banking and borrowing abstract this paper provides a general treatment of emission trading banking and borrowing in an intertemporal continuous time model using optimal control theory the decentralized behavior of firms is shown to lead to the least cost solution attainable under joint cost minimization explicit solutions for the time paths of emissions and permit prices are derived when firms are allowed to both bank and borrow and when firms are only allowed to bank emission permits the policy implications of emission banking and borrowing are discussed

market efficiency in the european carbon markets in this paper we study the relationship between futures and spot prices in the european carbon markets from the cost of carry hypothesis the aim is to investigate the extent of efficiency market the three main european markets bluenext eex and ecx are analyzed during phase ii covering the period from march 13 2009 to january 17 2012 futures contracts are found to be cointegrated with spot prices and interest rates for several maturities in the three co2 markets results are similar when structural breaks are taken into account according to individual and joint tests the cost of carry model is rejected for all maturities and co2 markets implying that neither contract is priced according to the cost of carry model the absence of the cost of carry relationship can be interpreted as an indicator of market inefficiency and may bring arbitrage opportunities in the co2 market

emissions trading with shares and coupons when control over discharges is uncertain abstract two important decisions in designing markets for tradable emissions permits are whether to allow banking of permits coupons and whether to allow trading in entitlements to future permits shares banking is predicted to reduce price instability when firms trade in a reconciliation market after the quantity of emissions has been determined tradable shares are a common feature in proposals for emissions trading in canada we conduct a laboratory experiment to investigate how bankable coupons and tradable shares affect efficiency and prices under uncertainty cognitive demands on the subjects are reduced by computerized advice on the optimal allocation of coupons across periods and the implied marginal values of coupons and shares banking share trading and uncertainty conditions are introduced in a complete factorial design with three observations per cell high efficiencies are observed across all treatments uncertainty in the control of emissions leads to substantial price instability when banking is not allowed banking virtually eliminates the instability but reduces the efficiency of the market institution share trading reduces trading volumes increases price stability and improves efficiency

allowance price drivers in the first phase of the eu ets abstract in the first phase of the eu emissions trading scheme eu ets the price per ton of co 2 initially rose to over 30 the price then collapsed to essentially zero by mid 2007 by deriving a structural model of the allowance price under the assumption of efficient markets i examine the extent to which this variation in price can be explained by marginal abatement costs i then gradually relax the model by allowing for delayed adjustment of price to fundamentals as well as by introducing lagged lhs variables the pattern of results suggests that while prices were not initially driven by marginal abatement costs this inefficiency was largely corrected after the accounting of 2005 emissions in april 2006

how to explain carbon price using market micro behaviour abstractin this article we analyse the micro behaviours of the emitting companies and financial intermediaries in the european union emissions trading scheme eu ets and their influence on carbon prices based on the full sample community independent transaction log citl the micro behaviours can be observed in a closed system the micro behaviours of the emitting companies are divided into compliance trading and non compliance trading based on the emitting companies trading motivations the micro behaviours of the financial intermediaries are measured by their influence on the total supply and demand in the market then an ar garch model is established to examine the dynamic relationships between carbon prices and the micro behaviours of the emitting companies and financial intermediaries the estimation results suggest that the prices behaviours relationship is significant other important findings are as follows 1 the mean value of carbon prices positively depends on the compliance trading

the market for sulfur dioxide emissions the 1990 clean air act amendments initiated the first large scale use of the tradable permit approach to pollution control the theoretical case for this approach rests on the assumption of an efficient market for emission rights the authors empirical analysis shows that the emission rights market created by the 1990 amendments had become reasonably efficient by mid 1994 they also show that the auctions specified in the amendments to jump start trading had become a small part of the overall market finally the authors demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices copyright 1998 by american economic association

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

an energy factor proportions model of the us economy abstract a factor proportions model examines the effects of falling energy input and its rising price in the us economy based on a novel production function motivated by the definition of physical work this physical production function specifies separate interaction of energy and labor with capital estimated with annual data from 1951 to 2008 energy has a large output elasticity and inelastic own input demand a rising energy price lowers the return to capital in the general equilibrium even though capital is a moderate substitute for energy energy has robust comparative static elasticities linked to manufacturing in the general equilibrium

electricity substitution some local industrial evidence substitution elasticities between electricity production and non production labor and capital in alabama s textiles paper chemicals and primary metals industries are estimated there is generally weak substitution between inputs and declining shares of production labor textiles exhibit a trend toward more capital intensive techniques all outputs are biased away from electricity electricity demand is price inelastic which implies regulatory constraints are binding

modeling and forecasting the volatility of carbon dioxide emission allowance prices a review and comparison of modern volatility models abstract the launch of the markets for carbon dioxide emission allowances was guided by the aim to use the supposedly efficient price formation mechanism of an organized exchange to optimally allocate a certain quantity of emissions among potential polluters while this introduction of a centralized trading arrangement should have helped to achieve required emission reductions with a minimum of economic losses from the viewpoint of market participants it has raised concerns about appropriate risk management provisions to cope with the fluctuations of time varying allowance prices the present review provides an overview over state of the art models for price volatility expanding the scope from relatively simple garch type models to models with long term dependence and regime switches including the relatively recent class of so called multifractal models we provide a comparative application of these models to carbon dioxide emission allowance prices from the european union emission trading scheme and evaluate their performance with up to date model comparison tests based on out of sample forecasts of future volatility and value at risk

market consistent modeling for cap and trade schemes and application to option pricing in this paper we refer to the requirement for industrialized countries to reach a domestic target for greenhouse emissions as ratified in the kyoto protocol and propose a market consistent model of futures price dynamics for cap and trade schemes designed in the spirit of the european union emissions trading scheme eu ets historical price dynamics for the eu ets suggest that both european emission allowance eua and certified emission reduction cer certificates generated by a nondomestic offset mechanism are significantly related we use an equilibrium framework to demonstrate that compliance regulation singles out special price dynamics based on this result we propose an arbitrage free model and apply it to the pricing of spread options between euas and cers

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

the spark spread and clean spark spread option based valuation of a power plant with multiple turbines abstract this paper offers a novel study of two key factors that affect the valuation of a natural gas fired power plant having multiple turbines carbon allowance prices and the ability to switch among turbines amid stricter environmental rules on co2 emissions a power plant operator needs to be able to judge how the purchase of carbon allowances affects the plant s expected value and whether the plant s value rises from switching among turbines this paper presents a model analysis of a spark spread and clean spark spread option based valuation of a power plant with multiple gas turbines using a bivariate and a tri variate lattice respectively results demonstrate that the purchase of co2 allowances lowers the plant s expected value conversely when operations of turbines are switched in response to price movements the plant s value increases this outcome has implications for plant management decisions when to switch among turbines and how the purchase of co2 allowances affects the plant s value

estimated substitution elasticities of a nested ces production function approach for germany this paper demonstrates an econometric estimation of substitution elasticities of a nested constant elasticity of substitution production function ces between capital energy and labour for the west german industry in the last few years ces production functions have become more important in economic modelling especially for applied general equilibrium models where ces production functions are an important building stone in the literature different results of estimated elasticities can be found this paper investigates three different approaches for nested ces production functions and their estimated substitution elasticities capital energy and labour are estimated as substitutes for the west german industry in the long run

the forecasting accuracy of implied volatility from ecx carbon options abstract this study analyzes the forecasting accuracy of the implied volatility of options on futures contracts for the delivery of co 2 emission allowances carbon options traded on the european climate exchange we demonstrate that option implied volatility is highly informative about the variance of returns realized over the remaining life of the options it is also directionally accurate in predicting future volatility changes however we also find that implied volatility of carbon options is biased especially for periods of time which do not coincide with the remaining life of the option this suggests that the market has yet to fully mature

a physical production function for the us economy this paper introduces and presents an estimate of a production function motivated by physics with labor and energy providing force to produce work the separate interactions of capital with labor and energy lead to reliable estimates for us output from 1951 to 2008 with fixed capital assets the labor force and total btu energy inputs underpaid energy has an output elasticity twice that of labor overpaid labor faces elastic own substitution while there is weak substitution for capital the policy implications of these properties are discussed

risk spillovers across the energy and carbon markets and hedging strategies for carbon risk this study examines the risk spillovers between energy futures prices and europe based carbon futures contracts we use a markov regime switching dynamic correlation generalized autoregressive conditional heteroscedasticity ms dcc garch model in order to capture the time variations and structural breaks in the spillovers we further evaluate the optimal weights hedging effectiveness and dynamic hedging strategies for the ms dcc garch model based on both the regime dependent and regime independent optimal hedge ratios we finally complement our analysis by examining the in and out of sample hedging performances for alternative strategies our results mainly show significant volatility and time varying risk transmission from energy markets to carbon market we also find that spot and futures segments of the emission markets exhibit time varying correlations and volatile hedging effectiveness the subsample estimates show significant changes in the hedge effectiveness over the different phases of the european carbon market these results have important investment and policy implications

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

dynamic translog and linear logit models a factor demand analysis of interfuel substitution in us industrial energy demand abstract we compare and contrast two popular dynamic flexible functional forms for cost functions the translog and the logit j bus econ stat 8 1990 347 353 using data on us industrial energy demand from 1960 to 1992 which has been analysed by previous studies energy econ 11 1989 89 94 appl econ 21 1989 931 945 j bus econ stat 13 1995 459 465 we show the crucial role played by different dynamic formulations of the translog in this analysis of factor demands with respect to rates of dynamic adjustment and substitution possibilities we conclude that the poor performance of the dynamic translog relative to the dynamic logit cannot be explained solely by dynamic model mis specification or the inclusion of price unresponsive non energy fuel use data our most robust empirical result is that coal and oil are substitutes

the efficacy of the european union emissions trading scheme depicting the co movement of carbon assets and energy commodities through wavelet decomposition abstract environmental system thresholds have been crossed for a number of dimensions of global environmental pollution such as greenhouse gas emissions under this scenario institutions and corporations are required to implement sustainable policies as a condition for humanity staying within planetary boundaries accordingly the european union created the largest emissions trading scheme in the world with the aim of properly managing corporations carbon dioxide reductions this paper aims to contribute to the literature focused on testing the effectiveness of institutional environmental management policies specifically this research evaluates whether the objectives of the european union emissions trading scheme are partially achieved by analyzing the dynamics of carbon assets and the main energy commodities worldwide this paper provides relevant information both for policy makers and company managers so that contributions towards the common goal of developing a clean energy future and curbing climate change are ameliorated based on wavelet coherence analysis this paper proposes a model free way of estimating the time varying correlations between carbon assets and energy commodities at both high and low frequencies our central results reveal that carbon assets and energy commodities present a changing lead lag behavior at different frequencies the energy commodities lead the european union allowances returns at medium frequencies but the contrary was true for the highest investment horizons this finding should be in line with the goal of significantly reducing emissions because during long cycles if the majority of companies have not switched to cleaner industrial processes they must buy more carbon assets increasing their prices in that case energy commodities would be more expensive because of the energy commodities market behavior during long term horizons with european union allowances lead the certified emissions reductions lead in a negative way most of the energy commodities at medium frequencies thus indicating that investors handling energy commodities oriented portfolios could incorporate the mentioned carbon assets for diversification purposes these specific findings suggest that polluting activities would be more expensive which would provide an incentive to companies to implement environmentally friendly industrial processes the european union emissions trading scheme can result in significant emission reductions and compliance of the european union with the objectives of the kyoto protocol

pricing emission permits in the absence of abatement abstract if emissions are stochastic and firms are unable to control them through abatement the cap in a permit market may be exceeded or not be reached i derive a binary options pricing formula that expresses the permit price as a function of the penalty for noncompliance and the probability of an exceeded cap under the assumption of no abatement i apply my model to the eu ets where the rapid introduction of the market made it difficult for firms to adjust their production technology in time for the first phase the model fits the data well implying that the permit price may have been driven by firms hedging against stochastic emissions

asymmetric risk spillover between financial market uncertainty and the carbon market a gas dcs copula approach abstract a thorough understanding the asymmetry in risk transferring mechanisms remains a challenge in the carbon market through the incorporation of the asymmetric tail distribution into the risk transferring mechanism the asymmetric response of the carbon market to financial market uncertainties can be explored herein we propose a generalized autoregressive score dynamic conditional score copula model to investigate the asymmetric risk spillover between financial market uncertainty and the carbon market we discover the existence of considerable asymmetric risk spillover from financial market uncertainty to the carbon market specifically the upper tail risk spillover effect is greater than the lower tail risk spillover effect the degree of risk spillover reached a peak during the european debt crisis also higher degrees of financial market uncertainty and especially uncertainty from the crude oil market cause a greater risk spillover to the carbon market than lower degrees of financial market uncertainty do in addition we discover that stock market uncertainty exhibits greater power than crude oil market uncertainty in transferring risk to the carbon market when systemic events occur our research provides meaningful information to investors and policy makers

self control and bargaining abstract this paper examines a bargaining game with alternating proposals where sophisticated quasi hyperbolic discounters negotiate over an infinite stream of payoffs in markov perfect equilibrium payoffs are almost always unique and a small advantage in self control can result in a large advantage in payoff in subgame perfect equilibrium a multiplicity of payoffs and delay can arise despite the complete information setting markov perfect equilibria are the best subgame perfect equilibria for the agent with more self control and the worst for the agent with less self control naivete can help a player by increasing their reservation value

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

dynamic behavior of co2 spot prices co2 emission allowances are traded nowadays over the counter otc and on exchanges across the european union eu it thus becomes increasingly important for traders of these emission certificates to have a valid co2 spot price model to value potential derivatives in addition co2 emitting companies require an adequate co2 spot price model in order to better assess their production costs and support emissions related investment decisions however sufficient price history is still lacking for the european union emission trading scheme eu ets we therefore present a tractable stochastic equilibrium model reflecting stylized features of the eu ets and analyze the resulting co2 spot price dynamics our main findings are that co2 prices do not have to follow any seasonal patterns discounted prices should possess the martingale property and an adequate co2 price process should exhibit a time and price dependent volatility structure a brief empirical examination regarding market efficiency complements our analysis