European carbon prices and banking restrictions : evidence from phase I (2005-2007)
Chevallier, Julien; Alberola, Emilie (2009), European carbon prices and banking restrictions : evidence from phase I (2005-2007), The Energy Journal, 30, 3, p. 51-80
Type
Article accepté pour publication ou publiéExternal document link
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1080159Date
2009Journal name
The Energy JournalVolume
30Number
3Publisher
International Association Energy Economists
Pages
51-80
Metadata
Show full item recordAbstract (EN)
The price of European Union Allowances (EUAs) has been declining at far lower levels than expected during Phase I (2005-2007). Previous literature identifies among its main explanations over-allocation concerns, early abatement efforts in 2005, and possibly decreasing abatement costs in 2006. We advocate low allowance prices may also be explained by banking restrictions between 2007 and 2008. Based on a Hotelling-CAPM analysis, we provide statistical evidence that the French and Polish decisions to ban banking contribute to the explanation of low EUA Phase I prices. Besides, we provide the first rigorous empirical verification that the cost-of-carry relationship between EUA spot and futures prices for delivery during Phase II does not hold after the enforcement of the inter-period banking restrictions. This situation may be interpreted as a sacrifice of the temporal flexibility offered to industrials in Phase I to correct design inefficiencies, and achieve an efficient price pattern in Phase II.Subjects / Keywords
Carbon emissions trading; CO2; European Union Emissions Trading Scheme; Prix; Cost-of-carry RelationshipRelated items
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