mathematical vindication of ricardo on machinery ricardo is shown to be right that machinery can hurt wages and reduce output a dramatic robot example reveals wicksell s error in believing that pareto optimality calls for no drop in total output from a viable invention under ricardo s axiom that labor supply adjusts to keep wages at the subsistence level he can correctly deduce on a market clearing basis a rise in his net product rent plus interest while the greater drop in population and total wages result in a reduction in his gross product rent plus interest plus wages

exploring the price dynamics of co2 emissions allowances in china s emissions trading scheme pilots establishing regional emissions trading scheme pilots in china is a newly transformative and explorative practice in this paper we examine the spot price dynamics asymmetric clustering and regime switching behaviors of co2 emissions allowances in the new china wide emissions trading scheme cets pilots using ar garch ar tarch and mrs ar garch models the regional ets pilots design in china vary widely in their coverage thresholds sector coverage emissions allocation and caps setting methods market trading rules and price stabilization provisions our empirical results indicate that the spot prices of regional emissions allowances exhibit significant dynamic behaviors asymmetric leverage effects and regime switching behaviors in the entire period considered previous market overreactions in the beijing tianjin and guangdong pilots have stronger price clustering effects on future conditional variances than do the shanghai and hubei pilots unexpected market shocks and greater persistence in the beijing tianjin and guangdong ets pilots display stronger market volatility and higher market risks and their asymmetric leverage effects display a decreasing trend in the volatility of the bea tjea and gdea prices the bea and shea prices exhibit significant regime switching behaviors price jumps and higher volatility in addition the changes in the regime switching phases are often related to the political mechanism design and the fundamental market factors those empirical results are beneficial for government decision makers and market participants to strengthen risk management strategies support emission related investment decisions and optimize co benefits of alternative energy environmental policies

nonparametric modeling of carbon prices this paper constitutes the first exercise of nonparametric modeling applied to carbon markets the framework of analysis is carefully detailed and the empirical application unfolds in the case of bluenext spot and ecx futures prices the data is gathered in daily frequency from april 2005 to april 2010 first we document the presence of strong nonlinearities in the conditional mean functions second the conditional volatility functions reveal an asymmetric and heteroskedastic behavior which is dramatically different between carbon spot and futures logreturns the results for spot prices are also robust to subsamples decomposition third we show in an out of sample forecasting exercise that nonparametric modeling allows reducing the prediction error by almost 15 compared to linear ar models this latter result is confirmed by the diebold mariano pairwise test statistic

dynamic evolution characteristics of european union emissions trade system price from high price period to low price period abstract carbon market is a valid measure for promoting green and low carbon development and price is the core of market mechanism in this work combining directed limited penetrable visibility graph and coarse graining method a new method is proposed to identify the potential periods and dynamic evolution characteristics of carbon price which opens up a new perspective for government and investors to understand evolution characteristics and prevent risks at the same time a empirical analysis is conducted based on eu ets daily price from september 29 2009 to september 29 2017 and the dynamic fluctuation characteristics of carbon price from high price period to low price period are obtained

income risk of eu coal fired power plants after kyoto coal fired power plants enjoy a significant advantage relative to gas plants in terms of cheaper fuel cost this advantage may erode or turn into disadvantage depending on co2 emission allowance price financial risks are further reinforced when the price of electricity is determined by natural gas fired plants marginal costs we aim to empirically assess the risks in eu coal plants margins up to the year 2020 parameter values are derived from actual market data monte carlo simulation allows compute the expected value and risk profile of coal plants earnings future allowance prices may spell significant risks on utilities balance sheets

sectoral and regional impacts of the european carbon market in portugal abstract across europe co 2 emission allowances represent one of the main policy instruments to comply with the goals of the kyoto protocol in this paper we use microdata to address two issues regarding the impact of the european carbon market eu ets first we analyze the sectoral effects of the eu ets in portugal the goal is to study the distributive consequences of imbalances with the novelty of taking into account firm financial data to put values into context we show that a large majority of installations in most sectors had surpluses and the opportunity to raise remarkable revenues in some cases we also look at the regional impact since the pre existing specialization of different regions in the production of different goods and services might lead to an uneven economic impact of the allowance market in particular portuguese data indicate a distribution of revenue from low income to high income regions or rather between installations located in those regions we focus on the first phase of the eu ets using data for each one of the 244 portuguese installations in the market as well as financial data for 80 of these installations although we also present data for 2008 and 2009

information linkage dynamic spillovers in prices and volatility between the carbon and energy markets abstract the european union emissions trading system eu ets has strengthened the information flow and connection between carbon market and energy markets which makes the carbon energy system more complicated this paper investigates information linkages and dynamic spillover effects between the carbon and energy markets we adopt a systemic time series approach to study connectedness in both returns and volatility in the carbon energy system moreover a rolling windows method is used to show the dynamic features empirical results show that brent oil prices play an important role in affecting carbon price changes and risks feedback exists from the carbon market to other energy markets and electricity prices are shown to be the biggest information receiver in the system it is also shown that the level of connectedness in the volatility system is substantially higher than that in the returns system our results can provide useful implications for policymakers to design market mechanisms and market investors to manage their portfolios

forecasting carbon futures volatility using garch models with energy volatilities abstract this article examines the volatility forecasting abilities of three approaches garch type model that uses carbon futures prices an implied volatility from carbon options prices and the k nearest neighbor model based on the results we document that garch type models perform better than an implied volatility and the k nearest neighbor model this result suggests that carbon options have little information about carbon futures due to their low trading volume we also investigate whether the volatilities of energy markets i e brent oil coal natural gas and electricity forecast following day s carbon futures volatility according to the results we suggest that brent oil coal and electricity may be used to forecast the volatility of carbon futures

carbon pricing and system linking lessons from the new zealand emissions trading scheme abstract textbook theory of linking carbon systems suggests linking reduces marginal abatement costs contrasting theoretical work and policy analyses suggests that linking or at least unfettered linking may not always be beneficial the new zealand emissions trading scheme nz ets is unique in that until 2013 it allowed unlimited use of kyoto allowances nz ets thus provides an ideal context to explore the effect of linking and linking restrictions on carbon pricing of small systems using data on importation and exportation of allowances we provide the first empirical analysis of the determinants of allowance prices in the early phase of the nz ets our results indicate that imports of offsets rather than fundamentals have been the major price determinant moreover the pricing of new zealand units nzus can be placed into three distinct periods delineated by two structural breaks in the first period the system is largely autarkic in the second period as international offset prices drop below the nzu price the system becomes a price taker in the final period following policy interventions the system regains some independence the case of the nz ets shows that small trading systems need to impose or have the option to impose quantitative import restriction so as to reap the benefits lower abatement cost but not the drawbacks importation of distortions and market integrity issues of linking

ecosystem services and regional development an application to sweden this study carries out interregional comparisons of development and sustainable use of natural capital with and without inclusion of non marketed ecosystem services a simple dynamic model of an open economy shows that appropriate adjustment of conventional income accounts includes flow and stock components but excludes explicit entrance of pollution calculations are made for swedish regions and for two types of ecosystem services pollution sequestration and recreational services provided by three types of ecosystems forests agricultural landscape and wetlands when comparing the adjusted and non adjusted regional income accounts it is shown that the two measurements generate significantly different pictures of regional income and growth regions that are traditionally considered as relatively less growth promoting are shown to hold important sources of wealth from natural capital while counties that are rich in conventional accounts fall behind when adjusting for values of changes in natural capital

a multiscale analysis for carbon price drivers abstract this study proposes a multiscale analysis model to explore and identify the carbon price drivers at different timescales by introducing the latest multivariate empirical mode decomposition carbon price and its potential drivers are decomposed into several groups of simple modes with specific economic meanings the cointegration techniques error correction model and newey west estimator are combined to capture the carbon price drivers at similar timescales illustrated by the samples of the european union emissions trading system from 2009 to 2016 a few interesting results can be found that at the original data level among the three most important drivers of carbon price electricity price and stock index show positive impacts while coal price shows a negative impact at different timescales the effects of electricity and stock index appear comparatively earlier which drive carbon price from the short timescales and continue to strengthen however the impacts of coal oil and gas prices are lagging behind which respectively drive the carbon price at the medium and long timescales

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

linear and nonlinear granger causality investigation between carbon market and crude oil market a multi scale approach abstract this paper investigates the causality between carbon market and crude oil market using a multi scale analysis approach in which two main steps are involved multi scale analysis and causality testing in multi scale analysis bivariate empirical mode decomposition bemd is employed to decompose the two series of market returns at different time scales in causality testing a linear and nonlinear integrated granger test is formulated to investigate the relationship among each pair of matched components on a similar time scale with the european union emission allowance eua futures and brent futures as study samples some interesting findings can be obtained 1 at the original data level without multi scale decomposition this study finds evidence supporting a neutrality hypothesis i e no granger causality between the carbon and crude oil markets 2 on small time scale within one week excluding non work days the two markets might be uncorrelated and driven by their own respective supply demand disequilibriums 3 for medium time scale above one week but below one year there is a strong bi directional linear and nonlinear spillover effect between the two markets due to certain extra factors with medium term effects e g significant events and policy changes 4 for long time scale the long term trends of the two markets appear an obvious linear relationship

eu emission allowances and the stock market evidence from the electricity industry this paper constitutes to our best knowledge the first econometric analysis on stock market effects of the eu emission trading scheme eu ets our results suggest that eu emission allowance eua price developments matter to the stock performance of electricity firms eua price changes and stock returns of the most important european electricity corporations are shown to be positively related this effect does not work asymmetrically so that stock markets do not seem to react differently to eua appreciations in comparison to depreciations the carbon market effect is shown to be both time and country specific it is particularly strong for the period of eua market shock in early 2006 and differs with respect to the countries where the electricity corporations analysed are headquartered stock market reactions to eua volatility could not be shown

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

eua and scer phase ii price drivers unveiling the reasons for the existence of the eua scer spread abstract this article studies the price relationships between eu emissions allowances euas valid under the eu emissions trading scheme eu ets and secondary certified emissions reductions scers established from primary cers generated through the kyoto protocol s clean development mechanism cdm given the price differences between euas and scers financial and industrial operators may benefit from arbitrage strategies by buying scers and selling euas i e selling the eua scer spread to cover their compliance position as industrial operators are allowed to use scers towards compliance with their emissions cap within the european system up to 13 4 our central results show that the spread is mainly driven by eua prices and market microstructure variables and less importantly as we would expect by emissions related fundamental drivers this might be justified by the fact that the eu ets remains the greatest source of cer demand to date

modelling the price spread between eua and cer carbon prices abstract this paper identifies factors impacting on the dynamics of the price spread between european allowances euas and certified emission reductions cers by detecting changes in the structural relationship between them while prior studies have assumed a fixed structural relationship this paper analyses the dynamic evolution of the price spread by employing a time varying parameter analysis using daily data from march 2008 to september 2011 the analysis reveals that a lack of competitive conditions in markets access constraints on the use and the availability of cers regulatory changes regarding both euas and cers and uncertainty surrounding cers can explain a significant portion of the price spread

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

an overview of co2 cost pass through to electricity prices in europe this paper investigates the link between wholesale electricity prices in europe and the co2 cost i e the price of european union allowances euas over the two first phases of the european union emissions trading scheme eu ets we set up a theoretical framework and an empirical model to estimate to what extent daily fluctuations of co2 costs may have impacted electricity prices regarding estimation results for the first phase of the eu ets about 42 of estimated pass through rates appear to be statistically significant while only one third of them are statistically different from zero in the second phase we try to improve those results by proposing alternative estimates based on the eu ets compliance periods

futures trading with information asymmetry and otc predominance another look at the volume volatility relations in the european carbon markets this paper constitutes the first exercise of analysing the european carbon market efficiency from a double perspective combining both nature of execution venues screen vs otc trading and their volatility liquidity relations using a bivariate asymmetric gjr garch model we first document that otc exchange traded trading volume shows consistent bi uni directional granger causality to our volatility estimates consistent with greater responsiveness of the otc exchange traded market to changes in market wide idiosyncratic risks second we report significant contemporaneous and lagged positive causality of otc derivatives volume on spot futures volatility confirming that the sequential information arrival hypothesis siah applies third we find that the one way causality from otc to futures volumes is mainly driven by heterogeneous investor beliefs trading volume provides an indication on how private information is dispersed and held at different levels rather than proxying information signal itself after rejecting execution venues substitutability we advocate for systematic clearing and netting of otc positions through a unique clearing house and reporting rules to identify speculation in line with mifid art 59 proposals

the classical classical fallacy a flagrant error dogged james steuart adam smith david ricardo john barton john stuart mill karl marx and classical writers generally modern commentators on classicism are enough tempted by the fallacy to generally overlook it as a vital flaw in the earlier writers this fallay can be called classically classical not in the sense of being the greatest error in the classical paradigm an award that would be hard even to define but in the sense that modern scholars ignorant of pre 1900 literature would be little tempted by it i do not denigrate or patronize a great writer of the past such as david ricardo when i objectively delineate his hits and misses the fallacy can be simply put fixed capitals are prejudicial to wages and the demand for labor circulating capitals wage fund items that represent wage outlays paid to workers at the beginning of a period of production which are not recouped until the end of that period of production and which of course bear an interest or profit rate during the transition are allegedly favorable to the real wage rate and to the demand for labor fixed capitals are durable produced inputs that render their services over a number of different production periods circulating capitals are produced inputs used up within one period of production they are relatable to but distinguishable from wage fund advances paid to workers at the beginning of a period of production to be recouped at its end along with an interest or profit return in the minds of heterodox economists and the lay public generally a technological change that made machinery newly viable was supposedly the kind of invention that could put people out of work temporarily reduce market clearing wage rates and in long run equilibrium at an unchanged subsistence wage rate call for a significantly reduced population by contrast therefore a new invention that displaced machinery in favor of various raw materials as inputs would supposedly raise the short run real wage and increase the demand for labor so powerful was the grip of what i shall dub the classical fallacy that it was being reminded of it in 1819 21 that appears to have enabled ricardo to recant in his famous third edition chapter on machinery his previous boner that every viable invention can be expected to raise every factor s return from today s wisdomor indeed the wisdom of 1900 that previous position of ricardo was nonsense there is no invisible hand that seeks out machines or new techniques only if they benefit everyone i

interaction among china carbon emission trading markets nonlinear granger causality and time varying effect abstract china makes great efforts to reduce carbon emissions and mitigate global greenhouse gas in order to identify the interaction among china cet markets this paper comprehensively investigates nonlinear granger causality and time varying effect in markets by using the hiemstra and jones hj test diks and panchenko dp test and time varying parameter structure vector autoregressive tvp svar model the empirical analysis has demonstrated china major cet markets significantly bidirectional nonlinear granger cause each other as to time varying effect we have obtained convincing findings that time varying impulse responses are among china major cet markets in the short term specifically guangdong hubei and shenzhen cet markets are time varying co movement negatively or positively related to each other over time implying there are deep bases for china national cet market construction furthermore the specific time point impulse effects support our discoveries in time varying impulse responses

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

a general equilibrium analysis on the impacts of regional and sectoral emission allowance allocation at carbon trading market abstract it is critical to adapt to climate change and reduce the overall carbon emissions china announced its nationally determined contributions ndc at the paris climate conference in 2015 the carbon cap and trade scheme which plays a key role in carbon emissions abatement is an effective policy for china to achieve its ndc this study focuses on the allocation of regional and sectoral initial carbon emission allowances in shanghai an impact evaluation on the macro economy carbon trading markets and participating sectors for the year 2030 was conducted by applying a computable general equilibrium cge model the results show that the carbon cap and trade scheme would cause a 3 4 gdp loss and an 8 9 welfare loss in 2030 the carbon price would be 161 2 usd t and 147 2 usd t under the two representative scenarios the allocation of initial allowances would have a significant impact on both carbon market scale and sectoral trading behaviors the power generation sector and the petrol oil sector would undertake the greatest output loss while the metal smelting sector would become the main seller furthermore the initial allowances allocation under a certain abatement target would hardly affect sectoral production but remarkably affect trade behaviors at the carbon trading markets

cyclical productivity in a model of labor hoarding abstract this paper develops a dynamic model of labor hoarding to explain two empirical facts the cyclical behavior of total factor productivity and the dynamic correlations of sectoral productivity with aggregate variables the model features convex costs of adjusting the labor force which induce firms to vary the intensity of labor utilization over the cycle in particular cyclical variations in labor effort take place as a response to expected future changes in industry conditions i test the restrictions imposed by the model for several two digit manufacturing industries under different assumptions about market structure and returns to scale then using the assumption that aggregate variables carry information about future changes in industry conditions i simulate the model s dynamic response of hours and productivity to aggregate innovations and compare them to those estimated from the data

does weather or energy prices affect carbon prices abstract this study investigates the extent that key energy prices coal gas oil and electricity and weather explain carbon prices a key feature of the european union emissions trading scheme eu ets and whether this relationship changed since full auctioning came into effect in 2013 energy prices were found to impact the carbon price in phase iii of the eu ets however modelling based solely on energy prices explained only 12 of carbon price variation weather variables did not affect the carbon price except for unanticipated temperature changes these results indicate that it is not the level of temperature that impacts the carbon price rather it is unanticipated changes in temperature that matter given that climate change is associated with increased variance in temperature this result is consistent with climate change resulting in greater carbon price volatility and higher hedging costs

the market for tradable ghg permits under the kyoto protocol a survey of model studies abstract this paper gathers results from 25 models of the market for tradable greenhouse gas ghg emission permits under the kyoto protocol due to diverging projections of emissions growth and different modeling approaches the model results differ substantially the average market volume is approximately 17 and 33 billion usd under global trading and annex b trading respectively including non carbon ghg lowers compliance costs and permit prices in the absence of the us permit demand roughly equals hot air from the former soviet union these countries can increase their revenues from selling permits by restricting supply which raises the permit price

the response of the beijing carbon emissions allowance price bjc to macroeconomic and energy price indices in 2013 china opened pilot carbon emission trading markets in seven provinces where carbon emission allowances have now been traded for more than two years in this paper we employ a structural var model and the price of the beijing carbon emission allowance to study the dynamic relationships among the price of the carbon emission allowance economic development and the price of energy this paper s data cover the period from april 2 2014 to november 6 2015 this paper provides information that will be helpful to both investors and governmental policy makers the results show that 1 an increase of one standard deviation in the coal price leads to an initial increase of approximately 0 1 in the beijing carbon price after 2 days there is a decrease of less than 0 1 and the price gradually increases by approximately 0 1 after 30 days 2 the price of the beijing carbon emission allowance is mainly affected by its own historical price 3 the beijing carbon emission allowance price crude oil price natural gas price and economic development have positive albeit non significant correlations

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

time varying correlations in oil gas and co2 prices an application using bekk ccc and dcc mgarch models previous literature has identified oil and gas prices as being the main drivers of co2 prices in a univariate generalized autoregressive conditional heteroscedasticity garch econometric framework alberola et al 2008 oberndorfer 2009 by contrast we argue in this article that the interrelationships between energy and emissions markets shall be modelled in a vector autoregressive var and multivariate garch mgarch framework so as to reflect the dynamics of the correlations between the oil gas and co2 variables overtime using the baba engle kraft kroner bekk constant conditional correlation ccc and dynamic conditional correlation mgarch dcc mgarch models on daily data from april 2005 to december 2008 we highlight significant own volatility cross volatility spillovers and own persistent volatility effects for nearly all markets indicating the presence of strong autoregressive conditional heteroscedasticity arch and garch effects besides we provide strong empirical evidence of tim

politics matters regulatory events as catalysts for price formation under cap and trade this paper investigates how the political process of making cap adjustments has shaped market outcomes in the world s largest cap and trade system the eu ets capitalizing on an event study method that incorporates an econometric technique designed to handle parameter instability and model uncertainty we assess the news implied price response to 29 hand collected announcements about the eu ets supply schedule our findings document a high market responsiveness to political events and reveal how market participants view the evolution of cap stringency in the light of a particular announcement we provide evidence that a sequence of strong event induced price drops evolve in the backloading decision process which is consistent with the interpretation that market participant s confidence in the political support for reform and probably the eu ets in general has been unsettled we also document positive price reactions to the 2020 and 2030 policy packages but not the 2050 roadmaps

delaying the introduction of emissions trading systems implications for power plant investment and operation from a multi stage decision model relying on real options theory we employ a multistage decision model to analyze the effect of delaying the introduction of emission trading systems ets on power plant investments in carbon capture and storage ccs retrofits on plant operation and on carbon dioxide co2 abatement unlike previous studies we assume that the investment decision is made before the ets is in place and we allow ccs operating flexibility for new power plant investments thus the plant may be run in ccs off mode if carbon prices are low we employ monte carlo simulation methods to account for uncertainties in the prices of co2 certificates other inputs and output prices relying on a realistic parameterization for a supercritical pulverized coal plant in china we find that ccs operating flexibility lowers the critical carbon price needed to support ccs investment because it renders ccs investment less irreversible for a low carbon price path operating flexibility also implies that delaying the introduction of an ets hardly affects plant co2 abatement since the plant operator is better off purchasing emission certificates rather than operating the plant in ccs mode interestingly for low carbon prices we find a u shaped relation between the length of the delay and the economic value of the plant thus delaying the introduction of an ets may make investors worse off

the impacts of liquidity dynamics on emissions allowances price different evidence from china s emissions trading pilots abstract the liquidities of china s emissions trading markets have significant impacts on emissions allowances price movement and pricing efficiency liquidity measures on illiquidity ratio and trade values indicate hubei emissions allowances hbea product has the highest liquidity shenzhen allowances sza and guangdong emissions allowances gdea products have the higher liquidity than beijing emissions allowances bea and shanghai emissions allowances shea products while tianjin emissions allowances tjea product has the lowest market liquidity in considered china s emissions trading pilots the dynamics of the illiquidity ratios for all selected emissions allowances products are negatively related with emissions allowances returns and trade volumes for bea tjea sza and hbea products are also negatively related with emissions allowances returns the dynamics of daily illiquidity ratios and trade based liquidity in beijing tianjin guangdong shenzhen hubei emissions pilots have significant volatility clustering impacts on the variances of regional emissions allowances returns previous market shocks of overnight and intraday price variations have the more persistent influences on the gdea returns than hbea returns reflecting greater inter day price ranges clustering effect

ricardo s volte face on machinery a formal restatement of the numerical example ricardo invoked to explain his change of mind on the feasibility of the depressing effect of technology on labor underlines the analytical difficulty that he could not overcome and thus explains his inconclusive results this difficulty is basically due to the absence of a clearly perceived demand theory demands for goods factor services and money characteristic of him and of classical economics in general since the focus of the technology labor issue is on the expected change of demand for labor in response to technical change the failure of classical economists and of ricardo to propose a relevant theory was inevitable

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

review of taiwan s climate policy after copenhagen abstract the copenhagen accord in 2009 initiated new opportunities for international cooperation in reducing greenhouse gas ghg emissions the purpose of this study was to review taiwan s current climate policy and in response to the copenhagen accord to deliberate this policy in the light of new strategic thinking the study proposes a two stage approach with a dividing line in 2020 in the first stage from now until 2020 strategy should be based on cost constraints with a suggested reduction cost below 60 t co 2 and implementation of domestic ghg emissions trading scheme and reduction strategies in the second stage from 2020 and beyond action by taiwan should accord with international cooperative actions to link its domestic emissions trading scheme with the international carbon market

deregulation intensity of competition industry evolution and the productivity growth of u s commercial banks we study the influence of the evolution in intrastate and interstate deregulations on the total factor productivity growth of u s commercial banking during 1971 95 we consider statewide deregulations in intrastate branching intrastate multibank holding company mbhc interstate multibank holding company and interstate mbhc de novo branching regulations results indicate that 1 long standing banking restrictions negatively affected banks productivity growth and 2 relaxing restrictions on intrastate branching expansion had a positive long run influence upon banks productivity growth the effect of interstate mbhc deregulations is largely short run and it is negative in the long run for interstate mbhc de novo branching deregulations

impact of the economic recession on the european power sector s co2 emissions abstract this paper investigates the impact of the economic recession on co 2 emissions in the european power sector during the years 2008 and 2009 three main determinants of the power sector s emissions are identified the demand for electricity the co 2 price and fuel prices a counterfactual scenario has been set up for each of these i e what these parameters would have been if not affected by the recession a simulation model of the european power sector is then employed comparing a historical reference simulation taking the parameters as actually occurred with the counterfactual scenarios the lower electricity demand due to the recession is shown to have by far the largest impact accounting for an emission reduction of about 175 mton the lower co 2 price due to the recession resulted in an increase in emissions by about 30 mton the impact of fuel prices is more difficult to retrieve an indicative reduction of about 17 mton is obtained mainly as a consequence of the low gas prices in 2009 the simulated combined impact of the parameters results in an emission reduction of about 150 mton in the european power sector over the years 2008 and 2009 as a consequence of the recession

interpreting the procyclical productivity of manufacturing sectors external effects of labor hoarding this paper investigates whether procyclical productivity is due to cyclical variations in the rate of utilization of labor or to technological externalities by looking at the relation between sectoral productivity and the level of aggregate activity empirical evidence is presented to distinguish the two hypotheses analysis of two digit u s manufacturing industries shows that sectoral productivity is more closely related to the rate of change of aggregate activity than to its level this result is consistent with the interpretation that cyclical productivity is due to cyclical variations in the rate of utilization of labor which responds to expected future industry conditions aggregate variables in production function regressions have therefore the role of forecasting variables for future industry conditions copyright 1997 by ohio state university press

global mechanisms for sustaining and enhancing pes schemes article i nfo an international payment for ecosystem service ipes schemes may be one of the only mechanisms available to stimulate the provision of vital non marketed ecosystem services at the global level as those nations that benefit from global ecosystem services ges cannot readily force other sovereign nations to provide them currently international trade offers trillions of dollars in incentives for countries to convert natural capital into marketable goods and services and few payments to entice countries to conserve natural capital in order to sustain critical non marketed ecosystem services we examine the biophysical characteristics of climate change and biodiversity to understand the obstacles to developing effective ipes schemes we find that none of the existing schemes for providing ges are adequate given the scale of the problem a cap and auction scheme for co2 emissions among wealthy nations could fund ipes and simultaneously deter carbon emissions to disburse funds we should adapt brazil s icms ecologico and apportion available funds to targeted countries in proportion to how well they meet specific criteria designed to measure the provision of ges individual countries can then develop their own policies for increasing provision of these services ensured of compensation if they do so indirect ipes should include funding for freely available technologies that protect or provide ges such as the low carbon energy alternatives that will be essential for curbing climate change markets rely on the price mechanism to generate profits which rations technology to those who can afford it reducing adoption rates innovation and total value

an equilibrium model of consumer energy choice using a personal carbon trading scheme based on allowance price abstract changes in consumer behavior due to a personal carbon trading pct scheme are theoretically attractive yet untested in practice in this paper simulations on the basis of an equilibrium model are used to examine the effects of carbon allowance prices on energy use choice under a particular pct scheme it is shown that the equilibrium price of allowances would emerge under the pct scheme considered here further analyses indicate that the quantity of energy consumption under pct is a nonlinear function of the allowance price with a sharp kink at the point of equilibrium when the allowance price is below the equilibrium price consumers would prefer higher carbon energy in contrast when the allowance price is above the equilibrium price consumers would choose lower carbon energy however when the allowance price equals the equilibrium value consumers would purchase lower carbon energy and higher carbon energy simultaneously furthermore it is shown that the initial allowance allocation could also affect energy use choice on the basis of these results one of the main implications is that the allowance price should exceed the breakeven price to stimulate consumers to switch to green energy and progressively live a low carbon lifestyle

interpreting the procyclical productivity of manufacturing sectors can we really rule out external effects recent empirical contributions on procyclical productivity have focused on the dynamic implications of persistent aggregate fluctuations on sectoral productivity given a permanent innovation in aggregate output unobserved variations of labour or capital utilization may have only a transitory effect on measured productivity whereas external effects should produce permanent effects it is found that persistent aggregate fluctuations have a permanent effect on productivity of four digit us manufacturing industries while a number of alternative explanations of this evidence are discussed and ruled out the findings are consistent with a simple model with external or thick market effects

cyclical productivity in europe and the united states evaluating the evidence on returns to scale and input utilization this paper studies procyclical productivity growth at the industry level in the united states and three european countries france germany and the netherlands industry specific demand side instruments are used to examine the prevalence of non constant returns to scale and unmeasured input utilization for the aggregate us economy unmeasured input utilization seems to explain procyclical productivity however this correction still leaves one in three us industries with procyclical productivity this failure of the model can also be seen in europe and is mostly concentrated in services industries

price discovery and volatility spillovers in the european union emissions trading scheme a high frequency analysis abstract this paper models the relationship of european union allowance spot and futures prices within the second commitment period of the european union emissions trading scheme based on high frequency data we analyze the transmission of information in first and second conditional moments to reveal long run price discovery we compute common factor weights of schwarz and szakmary 1994 and information shares of hasbrouck 1995 based on estimated coefficients of a vecm to analyze the short run dynamics we perform granger causality tests we identify the futures market to be the leader of the long run price discovery process whereas the informational role of the futures market increases over time in addition we employ a version of the ueccc garch model as introduced by conrad and karanasos 2010 to analyze the volatility transmission structure the volatility analysis indicates a close relationship between the volatility dynamics of both markets whereas in particular we observe spillovers from the futures to the spot market as a whole the investigation reveals that the futures market incorporates information first and then transfers the information to the spot market

why did wicksell change his mind about the machinery question abstract the article investigates wicksell s change of mind about the machinery question between 1890 and 1900 1901 wicksell at first sided with the so called compensation theory that workers are not harmed by the introduction of machinery in his lecture notes of april 1900 made available here for the first time wicksell deployed marginal productivity theory to discuss the effects of labour saving technical progress with inconclusive results finally in his published 1901 lectures and in his 1900 article about marginal productivity wicksell claimed that the introduction of machinery increases output and reduces wages his analysis was based on the demonstration that free competition maximizes output but not total utility it is argued that wicksell s change of mind and his mature formulation of the machinery question result from his critical assessment of the then new concept of pareto optimality together with his reinterpretation and rejection of ricardo s 1821 contention that the introduction of machinery may diminish output and employment

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

multiple bubbles in the european union emission trading scheme abstract the european union emission trading scheme eu ets is the first large scale co 2 emission trading system in the world carbon allowances are financial assets potentially vulnerable to the behavior of traders and investors in fact the carbon price has been quite volatile since the inception of the market and it has recently hit very low values however to date no work exists to evaluate whether volatility and price spikes are due to episodes of speculation and price bubbles our paper fills this gap we use the recent approaches developed by phillips and yu 2010 phillips et al 2011 and phillips et al 2015a 2015b who propose a recursive right sided unit root approaches to detect and date stamp mildly explosive behaviors and carbon market exuberance we complement this methodology by using the wild bootstrap procedure by goncalves and kilian 2004 to control for the heteroschedasticity of carbon price data analyzing the eu ets front month contract price from 2005 to 2014 we find different episodes of price bubbles these episodes are not explained by similar behavior of the fundamentals but seem related to energy and environmental policy announcements our results can provide insightful policy implications in the context of the actual carbon market reform as well as the implementation of stricter financial regulations rules to co 2 trading

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

abatement and allocation in the pilot phase of the eu ets we use historical industrial emissions data to assess the level of abatement and over allocation that took place across european countries during the pilot phase 2005 2007 of the european union emission trading scheme using a dynamic panel data model we estimate the counter factual business as usual emissions scenario for eu member states comparing this baseline to allocated and verified emissions we find that both over allocation and abatement occurred along with under allocation and emissions inflation over the three trading years of the pilot phase we find over allocation of approximately 280 million euas and total abatement of 247 mt co2 however we calculate that emissions inflation of approximately 73 mt co2 also occurred possibly due to uncertainty about future policy design features

the emissions trading paradox abstract this article considers the price history of co2 allowances in the eu emission trading scheme since european emissions trading started in 2005 the prices of allowances have varied between less than one and thirty euro per ton of co2 this previously unpredicted volatility and more notably a significant price crash in may 2005 led to the hypothesis that electricity producers might use their market power to influence the prices of allowances besides market power the combination of information asymmetry and price interdependencies between prices of primary goods especially electricity and allowances plays an important role in explaining the emissions trading paradox the model presented will show that banking can lead to such a price crash if market participators act rationally furthermore in such a scenario banking can be profitable for sellers at the cost of buyers

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

ricardo was right ricardo added a chapter on machinery to the third and last edition of his principles in it he contended that invention of machinery could reduce i the demand for labor ii wages and iii national income this paper is devoted to the analytical questions of whether ricardo was right that viable invention can reduce the total of real output after all competitive prices adjust to clear all markets and why so many mainstream economists doubt ricardo after a defense of ricardo s analysis the political and ideological aspects of the historical discussions are evaluated mathematical proofs are provided in an appendix

causes of the eu ets price drop recession cdm renewable policies or a bit of everything new evidence the price of eu allowances euas in the eu emissions trading scheme eu ets fell from almost 30 tco2 in mid 2008 to less than 5 tco2 in mid 2013 the sharp and persistent price decline has sparked intense debates both in academia and among policy makers about the decisive allowance price drivers in this paper we examine whether and to what extent the eua price drop can be justified by three commonly identified explanatory factors the economic recession renewable policies and the use of international credits capitalizing on marginal abatement cost theory and a broadly extended data set we find that only variations in economic activity and the growth of wind and solar electricity production are robustly explaining eua price dynamics contrary to simulation based analyses our results point to moderate interaction effects between the overlapping eu ets and renewable policies the bottom line however is that 90 of the variations of eua price changes remains unexplained by the abatement related fundamentals together our findings do not support the widely held view that negative demand shocks are the main cause of the weak carbon price signal in view of the new evidence we evaluate the eu ets reform options which are currently discussed

a model of carbon price interactions with macroeconomic and energy dynamics abstract this paper develops a model of carbon pricing by considering two fundamental drivers of european union allowances economic activity and energy prices on the one hand economic activity is proxied by aggregated industrial production in the eu 27 as it provides the best performance in a preliminary forecasting exercise vs other indicators on the other hand brent natural gas and coal prices are selected as being the main carbon price drivers as highlighted by previous literature the interactions between the macroeconomic and energy spheres are captured in a markov switching var model with two states that is able to reproduce the boom bust business cycle hamilton 1989 first industrial production is found to impact positively negatively the carbon market during periods of economic expansion recession thereby confirming the existence of a link between the macroeconomy and the price of carbon second the brent price is confirmed to be the leader in price formation among energy markets bachmeier and griffin 2006 as it impacts other variables through the structure of the markov switching model taken together these results uncover new interactions between the recently created eu emissions market and the pre existing macroeconomic energy environment

contextual political economy not whig economics the paper has three objectives first it seeks to resuscitate a methodology of the history of economic thought that takes account of the problem solving efforts of political economists rather than concentrating entirely on the putative advances in techniques of analysis detaching them from their political and social context second it seeks to establish the priority of two italian savants in theorising some basic features of capitalist growth long before its prime movers had been conceptualised in the eighteenth century third it puts colonialism and imperialism as the ever present components of capitalist development on centre stage contextual political economy would be a study of the capitalist system as it has really operated i e as a system characterised by enormous turbulence superimposed on growth in which formal and informal colonialism and speculation have played major roles

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

time and frequency connectedness among oil shocks electricity and clean energy markets abstract this paper examines the time and frequency connectedness among electricity carbon and clean energy markets and oil price demand and supply shocks in doing so we use the spillover method proposed by diebold and yilmaz 2012 and its extension in the frequency domain by barunik and k ehlik 2018 we find increased connectedness during the global financial crisis as well as in the shale oil revolution period the total connectedness is also higher in the short run compared to the long run due to their low connectedness electricity futures can act as a risk diversifier and safe haven asset against oil shocks net pairwise directional connectedness among oil shocks and the clean energy index is higher during the shale oil revolution these results have important implications for investors with different investment time horizons

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

the impact of the european union emission trading scheme on electricity generation sectors in order to comply with their commitments under the kyoto protocol france and germany participate to the european union emission trading scheme eu ets which concerns predominantly electricity generation sectors in this paper we seek to know if the eu ets gives appropriate economic incentives for an e cient and strong system in line with kyoto commitments because if so electricity producers in these countries should include the price of carbon in their costs functions after identifying the di erent sub periods of the eu ets during its pilot phase 2005 2007 we model the prices of various electricity contracts and look at their volatilities around their fundamentals while evaluating the correlation between the electricity prices in the two countries we finnd that electricity producers in both countries were constrained to include the carbon price in their cost functions during the rst two years of operation of the eu ets during this period german electricity producers were more constrained than their french counterparts and the inclusion of the carbon price in the cost function of electricity generation has been so much more stable in germany than in france furthermore the european market for emission allowances has increased the market power of the historical french electricity producer and has greatly contributed to the partial alignment of the wholesale price of electricity in france with those of germany

causalities between co2 electricity and other energy variables during phase i and phase ii of the eu ets the topic of this article is the analysis of the interplay between daily carbon electricity and gas price data with the european union emission trading system eu ets for co2 emissions in a first step we have performed granger causality tests for phase i of the eu ets january 2005 until december 2007 and the first year of phase ii of the eu ets 2008 the analysis includes both spot and forward markets given the close interactions between the two sets of markets the results show that during phase i coal and gas prices through the clean dark and spark spread impacted co2 futures prices which in return granger caused electricity prices during the first year of the phase ii the short run rent capture theory in which electricity prices granger cause co2 prices prevailed on the basis of the qualitative results of the granger causality tests we obtained the formulation testable equations for quantitative analysis standard ols regressions yielded statistically robust and theoretically coherent results

what policy adjustments in the eu ets truly affected the carbon prices abstract carbon market becomes increasingly popular as a cost effective instrument to mitigate co 2 emissions however its construction is a learning by doing process and needs consistent regulatory updates in order to deliver optimal effects this paper uses the event study method to assess the impacts of different policy adjustments on the eua returns in the european union emissions trading scheme eu ets since 2005 comparing to existing studies that focus on the impact of a single policy this paper provides a complementary reference on if and to what extent policy adjustments can impact the carbon prices by classifying all regulatory update events into six categories its key findings are as follows first aggregate impacts of total 50 events studied are low while impacts of events having underlying negative impacts are higher than those having underlying positive impacts second 24 events have significant impacts on eua returns and are coherent to their theoretical impacts except one event third events having negligible impact on eua returns are those that are announced not for the first time or those having no impact on co 2 quotas supply and demand finally there are different impact patterns some events have different impacts on short end and long end carbon prices

allowance price and distributional effects under a personal carbon trading scheme abstract personal carbon trading pct is a downstream cap and trade scheme to reduce carbon emissions from the household sector in comparison to an upstream carbon trading scheme pct is a progressive scheme in which the poorer consumers are mostly winners as their levels of emissions are generally lower this paper investigates the equilibrium price for allowances and distributional effects under a pct scheme first we propose an equilibrium model for pct from which we derive an equilibrium price for allowances second a consumer surplus analysis is conducted to examine the welfare changes caused by the pct scheme generally we find that the pct scheme is progressive and can provide a buffer between the energy and allowance price based on these results the implications are discussed and suggestions for a future study are provided

policy options to improve the effectiveness of the eu emissions trading system a multi criteria analysis abstract this paper considers several policy options which have been proposed to improve the functioning of the ets these options require an intervention either on the ets cap 30 target set aside carbon central bank long term target or on the carbon price european and national price floor we analyse the impact of each policy on the ets carbon price and emissions a multi criteria evaluation method is applied to compare the policy options against a plurality of environmental economic and procedural criteria we find that the final ranking depends on the goals to be achieved i e the relative weights attributed to the criteria when policymakers want mainly to support the carbon price both in the short and long run while improving ets flexibility and harmonization the ccb and the eu price floor are respectively ranked as first and second best options as the preference for environmental and implementation goals gradually increases the position of the eu price floor and ccb options tend to invert the 30 target should be adopted when reducing emissions is the priority goal while a national price floor is the worst option in this case nevertheless self interested states looking for a relatively quick feasible solution may find it optimal

morishima on ricardo a rejoinder in his reply to our review article kurz and salvadori 1992 of his ricardo s economics morishima 1989 morishima called our criticisms insignificant from the point of view of elaborating and developing the main problems posed or discussed in the book he added i have to say that i am unable to accept any of the criticisms they made morishima 1996 p 92 1 if morishima were right in regarding our criticisms as mistaken or not pertinent then the latter could hardly have any bearing on his inter pretation of ricardo however this is not the case all our objections stand firm none is refuted by morishima in his reply in much of his paper he tilts at windmills this will be shown in the following for the reader s convenience we shall retain the order in which morishima deals with our criticisms we begin with a few general remarks and conclude with a brief statement on the bearing of our criticism on the main problems posed or discussed in ricardo s economics placing special emphasis on the relationship between the analyses of ricardo and walras

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

modeling and explaining the dynamics of european union allowance prices at high frequency in this paper we model the adjustment process of european union allowance eua prices to the releases of announcements at high frequency controlling for intraday periodicity volatility clustering and volatility persistence we find that the high frequency eua price dynamics are very well captured by a fractionally integrated asymmetric power garch process the decisions of the european commission on second national allocation plans have a strong and immediate impact on eua prices on the other hand our results suggest that eua prices are only weakly connected to indicators about the future economic development as well as the current economic activity

modeling eu allowances and oil market interdependence implications for portfolio management abstract this paper examines the dependence structure between european union allowances euas and crude oil markets during the second commitment period of the european union emissions trading scheme and the implications for portfolio management using different copula models our findings suggest positive average dependence and extreme symmetric independence that is consistent with interdependence and no contagion effects between the eua and crude oil markets the implication of this result for eua oil portfolios points to the existence of diversification benefits hedging effectiveness and value at risk reductions the eua market is therefore an attractive market for investors in terms of diversifying market risk and reducing downside risk in crude oil markets

dynamic multiscale interactions between european carbon and electricity markets during 2005 2016 this study explores the dynamic multiscale interactions between carbon and electricity markets during phases i 2005 2007 ii 2008 2012 and ongoing iii 2013 2016 by introducing the bivariate empirical mode decomposition bemd linear and nonlinear granger causality tests firstly bemd is used to decompose the european carbon and electricity prices into several pairs of simple modes with different timescales secondly causality tests are performed at each pair of modes with a similar timescale significant but asymmetric causalities can be found that the bidirectional linear causality turns to a unidirectional one running from the electricity price to the carbon price from phase i to phase iii whereas the nonlinear interaction enhances from insignificance to significance during the three phases the causality at short timescale is consistent with that of the original data while the causalities at mid and long timescales are more diversified the findings obtained show that the effect of carbon market on the electricity market is weakening which indicates that it is needed to increase its efficiency by raising the carbon price moreover a dynamic adjusting mechanism of emission allowances will be called for as well as the guidance aimed at different timescales in the future

what happens to the relationship between eu allowances prices and stock market indices in europe abstract the stock market may reflect the economic conditions of an economy and a positive economic situation is expected to improve the companies profits which makes company shares more attractive since the expected dividends to shareholders will be larger theoretically higher economic activity leads to higher energy demand and consequently higher carbon emissions which give rise to higher eu allowances eua prices therefore the stock market and eua prices seem to be connected with causality going from the stock markets to eua prices this paper formally tests for it showing that the causality effectively runs from the stock market to the european climate exchange market furthermore the paper studies the effects of the evolution of european stock markets on the eua spot prices

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

exchange rate effect on carbon credit price via energy markets abstract this paper examines the impact of currency exchange rates on the carbon market we scrutinize this effect through the european union emission trading scheme eu ets which primarily uses two substitutable fossil energy inputs for the generation of electricity coal and natural gas the european coal market is directly driven by global coal markets that are denominated in usd whereas natural gas is mainly imported from russia and is denominated in euros the impulse response functions of a structural vector autoregression svar model demonstrate that a shock in the euro usd exchange rate can be transmitted through the channel of energy substitution between coal and natural gas and influence on the carbon credit market

the market microstructure of the european climate exchange abstract this paper analyzes the market microstructure of the european climate exchange the largest eu ets trading venue the ecx captures 2 3 of the screen traded market in eua and more than 90 in cer volume growth has averaged 277 in eua between 2005 and 2009 and 724 in cer since 2007 spreads range from 0 0188 to 0 0406 for eua and 0 0276 to 0 0796 for cer the median proportion of the spread due to adverse selection reaches 76 for eua and 75 for cer realized volatility bid ask spreads and adverse selection costs decline with verified emission releases market impact estimates imply that an average trade will move the eua market by 1 06 euro centimes and the cer market 1 45 the ecx is providing between 75 and 88 of price discovery for eua trading and between 64 and 72 for cer we find imbalances in the order book help predict returns for up to three days a simple trading strategy that enters the market long or short when the order imbalance is strong is profitable even after accounting for spreads and market impact

labor productivity in the efficiency wage model a consideration of the firm s death rate it is inappropriate to equate the representative firm with the typical firm particularly for economies which consist of small enterprises where a large number of jobs are created or disappear as establishments are born or die if workers care about the job disappearance risk their utility and effort offered will be influenced by the death rate of firms this paper sets out an efficiency wage model and takes the probability of the firm s closure into account by extension it is shown that equilibrium labor productivity is plausibly procyclical under certain circumstances which is consistent with the stylized facts observed in many countries

do transaction costs influence firm trading behaviour in the european emissions trading system this study is one of the first to empirically investigate firm trading behaviour and the importance of permit trading transaction costs such as information costs and search costs in the first phase of the european union s emissions trading system eu ets the signs and significance of our constructed transaction costs proxy variables indicate for a presence of these costs in the initial years of the eu ets in particular this paper shows that ets firms with the smaller number of installations and with less trading experience were less likely to participate in the european emissions trading market and traded the lower quantities of permits furthermore these firms chose to trade permits indirectly via third parties this study also supports the concerns that transaction costs could be excessive for smaller participants and firms operating in the new eu member states

a big data study on emitting companies performance in the first two phases of the european union emission trading scheme as co2 emissions are quantified by allowances and traded in markets wise trading strategies will bring emitting companies higher profits or lower costs based on the big data of community independent transaction log citl this article hereby presents a micro study on the emitting companies efforts in increasing profits and saving costs during the allowances trading in the first two phases of the european union emission trading scheme eu ets the efforts are measured by an after action factor of trading performance which is built on a series of behaviour and monetary variables by comparison demanders of the emitting companies are more inclined to reach a higher trading performance while that inclination is heterogeneous among the suppliers in addition emitting companies with lower emission levels had a better trading performance with a higher proportion of low emitting companies the manufacturing sector had a better trading performance than the energy sector the effect of the trading requirement on trading performance are investigated via a quantile regression mode results suggest that 1 the selling requirement of suppliers has a positive effect on their trading performance while the effect becomes weaker when the selling requirement increases 2 the buying requirement has a positive effect on the demanders trading performance only when the requirement is high and the effect becomes stronger as the requirement increases and 3 when the buying requirement is at a lower level demanders trading performance becomes worse as the requirement grows the conclusion is that the emission level industrial sector and trading requirement do have influences on the trading performance of emitting companies in emission trading

the vermont common assets trust an institution for sustainable just and efficient resource allocation both private and public sectors have failed to adequately provide critical ecosystem goods and services or an equitable distribution of wealth and income to address this problem the vermont legislature is considering the creation of a vermont common assets trust vcat that would make the state s atmosphere aquifers and other resources created by nature or by society as a whole the common property of all vermonters present and future under the trust a board of trustees would have the legal obligation to manage these assets for the benefit of all vermonters including future generations this paper first explains why certain resources are likely to be managed more sustainably fairly and efficiently as common property than as private property it then discusses mechanisms for integrating assets into the trust estimates of potential revenue from a vcat suggest that it could eliminate the state budget deficit contribute to a better distribution of wealth and resources and help address critical ecological problems survey results suggest that a vcat is politically feasible the vcat promises to be an important pilot project that could later be scaled up to a national or global level

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

how china s current carbon trading policy affects carbon price an investigation of the shanghai emission trading scheme pilot abstract to better establish a unified carbon market in china this study evaluates the effect of current carbon trading policy and further investigates the relationship between such policy that is published during the second phase of shanghai environment and energy exchange seee and shanghai emission allowance shea price we aim to analyze whether these policies can improve the operation efficiency of current carbon market by the mean reversion test cox ingersoll ross cir model and event study method we first analyze the potential price discovery function of shea products thereby describing the transmission channel of current policy to shea price then we examine the effect of carbon policies published in different periods on their corresponding shea price by the auto correlation test and cir simulation we find that 3 4 of all auto correlation values are less than 0 after apr 2017 and the minimum cumulative error is 31 3792 under the supply and demand channel these findings imply that shea price has the discovery function at the middle and end of trading period and the current policy affects shea price through its effect on the fundamentals of supply and demand further more than 60 of all r values r value that reflects the response of price to policy are less than 1 which implies that the published policy will improves future shea price accordingly we argue that seee belongs to a policy oriented market and the change of carbon price is closely related to emission allocation policies in this case china s government should further push forward the smooth operation of current carbon market by the aid of incentive policy in the coming period