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CO2 Emissions Allowances. Modeling the Price Dynamics in the EU Emission Trading System

Duguleana, Lucia LU and Dumitrache, Lena Iulia LU (2010) NEKM07 20101
Department of Economics
Abstract
The aim of this paper is to characterize the daily price fundamentals of European Union Allowances (EUAs) traded in the EU Emissions Trading Scheme (ETS) during the period September 2005 - February 2010. We use GARCH model in order to account for changes in volatility. We split our analysis into two periods according to the two phases of the ETS. We disregard the period 02.04.2007 – 11.08.2008, when the trading in the spot market was practically inexistent and the price of EUAs was smaller than 1 Euro. Our findings suggest that weather data does not have a linear influence, while the coldest days, extremely rainy days and extremely windy days have an important impact during the first period. From energy variables, brent is a sustainable... (More)
The aim of this paper is to characterize the daily price fundamentals of European Union Allowances (EUAs) traded in the EU Emissions Trading Scheme (ETS) during the period September 2005 - February 2010. We use GARCH model in order to account for changes in volatility. We split our analysis into two periods according to the two phases of the ETS. We disregard the period 02.04.2007 – 11.08.2008, when the trading in the spot market was practically inexistent and the price of EUAs was smaller than 1 Euro. Our findings suggest that weather data does not have a linear influence, while the coldest days, extremely rainy days and extremely windy days have an important impact during the first period. From energy variables, brent is a sustainable factor. Additionally, electricity and coal seem to be substitutes for each other, with electricity having a negative impact on EUAs prices in the first period and coal in the second. We also find that the change in industrial production is not one of the factors that seem to influence the price of emissions allowances. (Less)
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author
Duguleana, Lucia LU and Dumitrache, Lena Iulia LU
supervisor
organization
course
NEKM07 20101
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Emissions Allowances, Carbon Credits, Energy Variables, Weather Variables
language
English
id
1615940
date added to LUP
2010-06-18 08:51:59
date last changed
2010-06-18 08:51:59
@misc{1615940,
  abstract     = {{The aim of this paper is to characterize the daily price fundamentals of European Union Allowances (EUAs) traded in the EU Emissions Trading Scheme (ETS) during the period September 2005 - February 2010. We use GARCH model in order to account for changes in volatility. We split our analysis into two periods according to the two phases of the ETS. We disregard the period 02.04.2007 – 11.08.2008, when the trading in the spot market was practically inexistent and the price of EUAs was smaller than 1 Euro. Our findings suggest that weather data does not have a linear influence, while the coldest days, extremely rainy days and extremely windy days have an important impact during the first period. From energy variables, brent is a sustainable factor. Additionally, electricity and coal seem to be substitutes for each other, with electricity having a negative impact on EUAs prices in the first period and coal in the second. We also find that the change in industrial production is not one of the factors that seem to influence the price of emissions allowances.}},
  author       = {{Duguleana, Lucia and Dumitrache, Lena Iulia}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{CO2 Emissions Allowances. Modeling the Price Dynamics in the EU Emission Trading System}},
  year         = {{2010}},
}