scholarly journals California's carbon market and energy prices: a wavelet analysis

2018 ◽  
Vol 376 (2126) ◽  
pp. 20170256 ◽  
Author(s):  
Luís Aguiar-Conraria ◽  
Maria Joana Soares ◽  
Rita Sousa
Keyword(s):  
Wavelet Analysis ◽  
Fossil Fuels ◽  
Carbon Price ◽  
Carbon Market ◽  
Wavelet Coherence ◽  
Gasoline Prices ◽  
Energy Prices ◽  
Cap And Trade ◽  
Significant Measure ◽  
Carbon Prices

Carbon price is a key variable in management and risk decisions in activities related to the burning of fossil fuels. Different major players in this market, such as polluters, regulators and financial actors, have different time horizons. We use innovative multivariate wavelet analysis tools, including partial wavelet coherence and partial wavelet gain, to study the link between carbon prices and final energy prices in the time and frequency dimensions in California's carbon market, officially known as the California cap-and-trade programme. We find that gasoline prices lead an anti-phase relation with carbon prices. This result is very stable at lower frequencies (close to 1-year period cycles), and it is also present before mid-2015 in the 20–34 weeks frequency band. Regarding electricity, we find that at about a 1-year period, a rise in carbon prices is reflected in higher electricity prices. We conclude that the first 5 years of compliance of the California cap-and-trade programme show that emissions trading is a significant measure for climate change mitigation, with visible rising carbon prices. The quantitative financial analytics we present supports the recent decision to extend the current market to 2030 without the need for complementary carbon pricing schemes.This article is part of the theme issue ‘Redundancy rules: the continuous wavelet transform comes of age’.

scholarly journals Does the Impact of Carbon Price Determinants Change with the Different Quantiles of Carbon Prices? Evidence from China ETS Pilots

2020 ◽  
Vol 12 (14) ◽  
pp. 5581 ◽  
Author(s):  
Wenjun Chu ◽  
Shanglei Chai ◽  
Xi Chen ◽  
Mo Du
Keyword(s):  
Emission Trading ◽  
Carbon Price ◽  
Carbon Market ◽  
Emission Trading Scheme ◽  
Energy Prices ◽  
Price Determinants ◽  
Trading Scheme ◽  
The Impact ◽  
Carbon Prices ◽  
Different Levels

Since carbon price volatility is critical to the risk management of the CO2 emissions trading market, research has focused on energy prices and macroeconomic drivers which cause changes in carbon prices and make the carbon market more volatile than other markets. However, they have ignored whether the impact of carbon price determinants changes when the carbon price is at different levels. To fill this gap, this paper applies a semiparametric quantile regression model to explore the effects of energy prices and macroeconomic drivers on carbon prices at different quantiles. The model combines the advantages of parameter estimation, nonparametric estimation and quantile regression to describe the nonlinear relationship between carbon price and its fundamentals, which do not need to make any assumptions about the random error. Carbon prices are high–tailed and exhibit higher kurtosis, the traditional models which tend to assume that data are normally distributed can’t perform well. Furthermore, the semiparametric model doesn’t need to assume that the data are normally distributed. Therefore, the semiparametric model can effectively model the data. Some new evidence from China’s emission trading scheme (ETS) pilots shows that energy prices and macroeconomic drivers have different effects on carbon prices at high or low quantiles. First, the negative impact of coal prices on carbon prices was greater at the lower quantile of carbon prices in the Shenzhen ETS pilot. However, the effects of coal prices were positive in the Beijing ETS pilot, which may be attributed to great demand for coal. Second, oil prices had greater negative effects on carbon prices at higher quantiles in Beijing and Hubei ETS pilots. This can be attributed to the fact that businesses use less oil when carbon prices are high. For the Shenzhen ETS pilot, the effects of oil prices were positive. Third, natural gas prices have a stronger effect on carbon prices as quantiles increased in the Beijing and Hubei ETS pilots. Lastly, the effects of macroeconomic drivers on carbon prices at low quantiles were stronger in the Shenzhen ETS pilots and higher at the medium quantiles in Beijing and Hubei ETS pilots. These findings suggest that the impact of determinants on the carbon prices at different levels is not constant. Ignoring this issue will lead to a missed warning about the risks of the carbon market. This study will be of positive significance for China’s emission trading scheme (ETS) pilots, in order to accurately monitor the effects of carbon prices determinants and effectively avoid carbon market risks.

scholarly journals Information Linkage between Carbon and Energy Markets: Multiplex Recurrence Network Approach

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-12 ◽  
Author(s):  
Hua Xu ◽  
Minggang Wang ◽  
Weiguo Yang
Keyword(s):  
Time Delay ◽  
Natural Gas ◽  
Carbon Price ◽  
Energy Markets ◽  
Carbon Markets ◽  
Energy Prices ◽  
The European Union ◽  
Linkage Relationship ◽  
Leading Role ◽  
Carbon Prices

In this paper, a multilayer recurrence network is introduced to examine the information linkage between carbon and energy markets. We first construct a multilayer recurrence network of energy and carbon markets, and we define the information linkage coefficient to measure the linkage relationship between the network layers based on the network microstructure. To measure the mutual leading relationship between carbon and energy markets, we construct a time-delay multilayer recurrence network and introduce the time-delay information linkage coefficient to measure the intersystem interaction. The carbon and energy prices, including West Texas Intermediate crude oil, coal, natural gas, and gasoline, from February 22, 2011, to April 1, 2019, are selected as sample data for empirical analysis. The results show that the linkage relationship between oil, coal, natural gas, and carbon prices presents a U-shaped trend in the second, transitional, and third phases of the European Union carbon market, while the linkage trend of gasoline and carbon prices continues to rise. The mutual leading relationship between energy and carbon prices changes in different stages, and carbon price plays a leading role at the present stage.

scholarly journals COMBINING MULTIPLE CLIMATE POLICY INSTRUMENTS: HOW NOT TO DO IT

2010 ◽  
Vol 01 (03) ◽  
pp. 209-225 ◽  
Author(s):  
SAMUEL FANKHAUSER ◽  
CAMERON HEPBURN ◽  
JISUNG PARK
Keyword(s):  
Climate Change ◽  
Carbon Tax ◽  
Climate Change Policy ◽  
Policy Instruments ◽  
Carbon Price ◽  
Reserve Price ◽  
Cap And Trade ◽  
Change Policy ◽  
Hybrid Instruments ◽  
Carbon Prices

Putting a price on carbon is critical for climate change policy. Increasingly, policymakers combine multiple policy tools to achieve this, for example by complementing cap-and-trade schemes with a carbon tax, or with a feed-in tariff. Often, the motivation for doing so is to limit undesirable fluctuations in the carbon price, either from rising too high or falling too low. This paper reviews the implications for the carbon price of combining cap-and-trade with other policy instruments. We find that price intervention may not always have the desired effect. Simply adding a carbon tax to an existing cap-and-trade system reduces the carbon price in the market to such an extent that the overall price signal (tax plus carbon price) may remain unchanged. Generous feed-in tariffs or renewable energy obligations within a capped area have the same effect: they undermine the carbon price in the rest of the trading regime, likely increasing costs without reducing emissions. Policymakers wishing to support carbon prices should turn to hybrid instruments — that is, trading schemes with price-like features, such as an auction reserve price — to make sure their objectives are met.

scholarly journals Influencing factors of price fluctuation in China’s carbon market

2020 ◽  
Vol 218 ◽  
pp. 01044
Author(s):  
Qi Wei ◽  
Yuanyuan Bian ◽  
Xuejuan Yang
Keyword(s):  
Negative Impact ◽  
Positive Impact ◽  
Emission Trading ◽  
Carbon Price ◽  
Carbon Market ◽  
Coal Consumption ◽  
Factors Affecting ◽  
Price Signals ◽  
Carbon Emission Trading ◽  
Carbon Prices

Carbon emission trading is an important countermeasure for countries around the world to cope with the challenge of climate change. Price signals in the carbon market play an important stabilizing role. Therefore, research on the factors affecting carbon price fluctuations is of great significance. Based on this, an empirical study on the fluctuation factors of carbon price in China’s pilot carbon market showed that: gross industrial output, coal consumption and the number of extreme weather have a positive impact on carbon prices, while the technology innovation index has a negative impact on carbon prices. This article puts forward suggestions on the construction of the carbon market, stabilizes carbon prices, and promotes the development of China’s carbon market.

scholarly journals Sustainability in Material Purchasing: A Multi-Objective Economic Order Quantity Model under a Cap and Trade System

2018 ◽  
Author(s):  
Daria Battini ◽  
Martina Calzavara ◽  
Ilaria Isolan ◽  
Fabio Sgarbossa ◽  
Francesco Zangaro
Keyword(s):  
Global Warming ◽  
Lot Sizing ◽  
Carbon Price ◽  
Economic Policies ◽  
Purchasing Decisions ◽  
Cap And Trade ◽  
Mitigation Policy ◽  
Trading Systems ◽  
Multi Objective ◽  
Carbon Prices

Sustainability in material purchasing is a growing area of research. Goods purchasing decisions strongly affect transportation path flows, vehicle consolidation, inventory levels and related obsolescence costs. Within a global sourcing context, companies experience the need of new decision making approaches capable to consider a large variety of factors, also linked with society and environment. Environmental impact assessment has become a key requirement for materials purchasing and transportation decisions since global warming is a rising concern both in academic and industrial researches. In fact, it is well known that the freight transport industry is responsible for large amounts of carbon emissions contributing to global warming. In this paper, we initially analyse and compare the environmental economic policies established by the International Governments in relation to the carbon trading systems adopted. Then, we develop a multi-objective lot sizing approach useful in practice to define the sustainable quantity to purchase when a Cap and Trade mitigation policy is present. We further analyse the model behaviour according to different carbon price values by demonstrating that carbon prices are still far too low to motivate managers towards sustainable purchasing choices.

FORECASTING OF OIL AND AGRICULTURAL COMMODITY PRICES: VARMA VERSUS ARMA

2017 ◽  
Vol 12 (03) ◽  
pp. 1750012 ◽  
Author(s):  
MUSTAFA GÜLERCE ◽  
GAZANFER ÜNAL
Keyword(s):  
Moving Average ◽  
Commodity Prices ◽  
Wavelet Coherence ◽  
Autoregressive Moving Average ◽  
Multiple Time ◽  
Energy Prices ◽  
Agricultural Commodity ◽  
Vector Autoregressive ◽  
Dynamic Correlations ◽  
Model Free

The aim of this paper is to show that the estimates made with vector autoregressive–moving-average (ARMA) models based on the coherent time intervals of the multiple time series give more precise results than the univariate case. The previous literature on dynamic correlations (co-movement) in between food and energy prices has mixed results and mainly based on parametric approaches. Therefore, partial wavelet coherence (PWC) and multiple wavelet coherence (MWC) methods are used, respectively, to uncover the coherency simultaneously for time and frequency domains. In our study; world oil, corn, soybeans, wheat and sugar prices are examined instead of the return and volatility relationship between oil and agricultural commodities due to model-free approach of wavelet analysis.

Firm-specific responses to energy policies in Dutch horticulture

2021 ◽  
Author(s):  
Evert Los ◽  
Cornelis Gardebroek ◽  
Ruud Huirne
Keyword(s):  
Energy Demand ◽  
Fossil Fuels ◽  
Model Fit ◽  
Energy Prices ◽  
Energy Policies ◽  
Additional Energy ◽  
Demand Functions ◽  
Policy Debates ◽  
Energy Tax ◽  
Conventional Models

Abstract Reducing the usage of fossil fuels is a central issue in ongoing policy debates. This in particular holds for Dutch horticulture, given its energy-intensive production. We analyse differences in energy usage and price responsiveness of horticultural firms by estimating energy demand functions using a Bayesian random coefficient model. Beyond, the effects of a proposed energy tax are assessed. Allowing for firm-specific energy price coefficients gives a better model fit compared to conventional models with fixed slope parameters. This confirms that firms respond differently to energy prices, which is taken into account in simulating the effects of more restrictive energy policies. The results show that larger-sized firms use less gas per square meter yet also point at a considerable spread in additional energy expenses between firms.

Carbon Pricing Lessons

2018 ◽  
pp. 185-204
Author(s):  
Barry G. Rabe
Keyword(s):  
Fossil Fuels ◽  
Oil And Gas ◽  
Carbon Price ◽  
Past Experience ◽  
Political Support ◽  
Careful Attention ◽  
Effective Management ◽  
Carbon Pricing ◽  
Energy Taxation ◽  
Do So

This chapter attempts to distil key lessons from recent decades of experience with carbon pricing. It notes that American emissions have actually dropped despite the lack of national carbon pricing and that future attempts to develop carbon pricing need to draw directly from past experience. This includes careful attention to building political constituencies, developing effective management systems, and setting politically realistic goals. The chapter also explores other forms of energy taxation that might serve to impose a carbon price but do so at the point of extracting fossil fuels from below the surface of the ground. Nearly all states that produce oil and gas impose severance taxes and they generally retain broad political support across partisan lines.

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