Record Details

Do Dynamic Linkages Exist Among European Carbon Markets?

International Business & Economics Research Journal

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Field Value
 
Title Do Dynamic Linkages Exist Among European Carbon Markets?
 
Creator Niblock, Scott J.
Harrison, Jennifer L.
 
Subject Finance
Carbon Markets; EU ETS; Cointegration; Granger Causality; Impulse Response Functions
 
Description In this paper we examine statistical relationships among European carbon markets from 2005 to 2010. We use a time-series approach using 1,220 daily (spot and forward) price data observations from Phase I and Phase II of the European Union Emissions Trading Scheme (EU ETS). Procedures such as unit root, cointegration, vector error correction models (VECMs), Granger causality, and generalised impulse response functions are employed in the analysis. The results reveal dynamic linkages among spot and forward carbon prices in Phases I and II, indicating that joint price discovery is taking place in carbon markets (at least in the short-run). However, evidence of constrained long-run information flows in Phase II, as indicated by the joint short- and long-run Granger causality testing, may be problematic for policy makers. This finding suggests that the coordinated policies designed to improve the operation and transparency of the EU ETS in Phase II may have actually been counter-effective. If carbon pricing mechanisms are dysfunctional, this has implications for the informational efficiency of carbon markets in Phase II and beyond, thus signalling the possibility of arbitrage and other profitable trading opportunities for market participants. Further research could attempt to address these issues.
 
Publisher The Clute Institute
 
Date 2011-12-21
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://www.cluteinstitute.com/ojs/index.php/IBER/article/view/6669
10.19030/iber.v11i1.6669
 
Source International Business & Economics Research Journal (IBER); Vol 11 No 1 (2012); 33-44
2157-9393
1535-0754
10.19030/iber.v11i1
 
Language eng
 
Relation https://www.cluteinstitute.com/ojs/index.php/IBER/article/view/6669/6744