TY - CEPII
A1 - Anna Creti
A1 - Pierre-André Jouvet
A1 - Valérie Mignon
TI - Carbon Price Drivers: Phase I Versus Phase II Equilibrium?
IS - 2011-09
T3 - Working Papers
KW - EU ETS
KW - CARBON PRICE
KW - ENERGY PRICES
KW - COINTEGRATION
N2 - 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 on 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.
ER -