Emissions Compliances and Carbon Prices under the EU ETS: A Country Specific Analysis of Industrial Sectors

This article critically examines the impact of industrial production in sectors covered by the EU Emissions Trading Scheme (EU ETS) on emissions allowance spot prices during Phase I (2005-2007). We find evidence that the effect of industrial production activity on EU carbon price changes shall be an...

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Bibliographic Details
Published in:Journal of policy modeling 2009-05, Vol.31 (3), p.446-462
Main Authors: Alberola, Emilie, Chevallier, Julien, Chèze, Benoît
Format: Article
Language:English
Subjects:
Carbon emissions
Carbon pricing
CO 2 emissions
Compliance
Emissions Trading
EU ETS
EU ETS Emissions Trading Carbon pricing CO2 emissions Industrial production
European Union
Germany
Industrial production
Industrial sector
Measurement
Poland
Pricing
Spain
United Kingdom
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Summary:This article critically examines the impact of industrial production in sectors covered by the EU Emissions Trading Scheme (EU ETS) on emissions allowance spot prices during Phase I (2005-2007). We find evidence that the effect of industrial production activity on EU carbon price changes shall be analysed in conjunction with production peaks and compliance net short/long positions. The results extend previous literature by showing that carbon price changes react not only to energy prices forecast errors and extreme temperature events, but also to industrial production in two sectors covered by the EU ETS: combustion and iron. Based on a country-specific analysis, after disentangling the effects of industrial production peaks and CO"2 emissions compliance at the EU 24 level, we capture the effects of the variation of industrial production on EU carbon price changes in Germany, Poland, Spain and the UK. All rights reserved, Elsevier
ISSN:0161-8938
1873-8060
DOI:10.1016/j.jpolmod.2008.12.004