The Efficiency of CO2 Market in the Phase III EU ETS: Analyzing in the Context of a Dynamic Approach

2021 ◽  
Author(s):  
Majid Mirzaee Ghazani ◽  
Mohammad Ali Jafari
Keyword(s):  
Historical Data ◽  
Time Windows ◽  
Oscillatory Behavior ◽  
Phase Iii ◽  
Eu Ets ◽  
Test Statistics ◽  
Dynamic Approach ◽  
Window Technique ◽  
Rolling Window ◽  
The Eu

Abstract This study has investigated the changing efficiency for the phase III EU ETS CO2 market using the daily historical data of allowance futures prices and coverage from August 2015 to June 2019. To achieve this goal, we have applied two alternative tests for checking dependency by linear and nonlinear methods, which include Generalized Spectral (GS) and Automatic Portmanteau (AQ). Also, we had a comprehensive look at the carbon market evolution and the EU ETS scheme development over time. The analysis of observed results validates the Adaptive Market Hypothesis (AMH) in the market, which corresponds with the oscillatory behavior of the applied test statistics' p-values. The other aspect of the study was to analyze the existence of evolutionary behavior on the market. To reach this purpose, we checked the results by applying a rolling window technique with four different time windows (50, 100, 150, and 250 days) on the test statistics in harmony with the adaptive market hypothesis. The obtained results show that overall, market efficiency has been improved by moving toward implementing the higher window lengths.

scholarly journals Co-Movements between Eu Ets and the Energy Markets: A Var-Dcc-Garch Approach

Mathematics ◽  
2021 ◽  
Vol 9 (15) ◽  
pp. 1787
Author(s):  
Pilar Gargallo ◽  
Luis Lample ◽  
Jesús A. Miguel ◽  
Manuel Salvador
Keyword(s):  
Fossil Fuels ◽  
Spillover Effect ◽  
Warning System ◽  
Energy Transition ◽  
Clean Energy ◽  
Stock Index ◽  
Phase Iii ◽  
Response Analysis ◽  
Eu Ets ◽  
The Eu

This paper analyzes the co-movements of prices of fossil fuels, energy stock markets and EU allowances. This analysis is conducted in order to identify the spillover effect of volatility and correlation among these financial markets, and to provide a scientific basis that shows the interest of incorporating sustainable assets in the design of minimum risk strategies of investment. To achieve this goal, we have used a Vector Autoregressive-Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroscedasticity (VAR-DCC-GARCH) model that also incorporates a stock index of industrial companies as a leading indicator of the level of economic activity. In addition, the paper conducts an impulse response analysis to determine how unexpected shocks to prices are propagated along time, and, in particular, how they affect prices of the others, both in mean, variance and correlation. Therefore, the results of this one- and two-dimensional analysis allow for the study of short and long run dynamics of the relationship among those prices, thus, providing greater meaning and information for investors, which has implications for building their portfolios. The analyzed period was from January 2010 to February 2021, so that the data include half of phase II, full phase III and the onset of phase IV of the EU ETS, as well as the COVID-19 outbreak in the European context. We also analyzed whether the EUA price impulses the demand of clean energy stocks, which has important implications for the objective of triggering the investment in clean energy. Our results show the transmission mechanism of all of those prices, which are relevant not only for investors but also for policymakers to construct an early-warning system, revealing the most important transmission channels. Moreover, from an investment viewpoint, we observe a decline in dirty energies and a rise in the clean energy market, which might be an indication of the progress towards the energy transition to renewables sources within a circular economy perspective. Therefore, this shows that the EU ETS is achieving its goals, and that clean energy companies, aligned with their role towards socially responsible initiatives, are also gaining acceptance in terms of investments, which would be beneficial for the environment.

Multiscale interplay of higher-order moments between the carbon and energy markets during Phase III of the EU ETS

Energy Policy ◽  
2021 ◽  
Vol 156 ◽  
pp. 112428
Author(s):  
Xingyu Dai ◽  
Ling Xiao ◽  
Qunwei Wang ◽  
Gurjeet Dhesi
Keyword(s):  
Energy Markets ◽  
Higher Order ◽  
Phase Iii ◽  
Eu Ets ◽  
Higher Order Moments ◽  
The Eu

scholarly journals Cryptocurrencies, gold, and WTI crude oil market efficiency: a dynamic analysis based on the adaptive market hypothesis

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Majid Mirzaee Ghazani ◽  
Mohammad Ali Jafari
Keyword(s):  
Crude Oil ◽  
Market Efficiency ◽  
Historical Data ◽  
Test Statistics ◽  
Oil Market ◽  
West Texas ◽  
Window Method ◽  
Rolling Window ◽  
Data Coverage ◽  
Daily Returns

AbstractThis study examined the evolving oil market efficiency by applying daily historical data to the three benchmark cryptocurrencies (Bitcoin, Ethereum, and Ripple), gold, and West Texas Intermediate (WTI) crude oil. The data coverage of daily returns was from August 2015 to April 2019. We applied two alternative tests to examine linear and nonlinear dependency, i.e., automatic portmanteau and generalized spectral tests. The analysis of observed results validated the adaptive market hypothesis (AMH) in all markets, but the degree of adaptability between the data was different. In this study, we also analyzed the existence of evolutionary behavior in the market. To achieve this goal, we checked the results by applying the rolling-window method with three different window lengths (50, 100, and 150 days) on the test statistics, which was consistent with the findings of AMH.

Moving Towards Phase III—Key Elements of the Review of the EU Emissions Trading Scheme

2008 ◽  
Vol 5 (2) ◽  
pp. 159-181
Author(s):  
Simon Marr ◽  
Johannes Enzmann
Keyword(s):  
Emissions Trading ◽  
Phase Iii ◽  
Full Potential ◽  
Eu Ets ◽  
Emissions Trading Scheme ◽  
Long Time ◽  
Trading Scheme ◽  
Time Planning ◽  
Eu Emissions Trading Scheme ◽  
The Eu

AbstractWith the Climate and Energy Package the European Commission has also published its draft for a revised EU Emissions Trading Scheme from 2013 onwards. The draft revision of the EU ETS serves as the EU's main pillar to fight climate change in that it requires a reduction of mainly CO2 of 21% below 2005 figures for the EU's major emissions sources in the energy and industry sectors. In addition, most notably the EU is proposing an EU wide cap and harmonised allocation rules, in order to exploit the full potential of emissions trading making national allocation plans ghosts of the past. The revised EU ETS gives investors into CDM projects the necessary long time planning security for investments into projects. At the same time it sends out a strong signal to the international negotiations for a post-2012 climate agreement in that it allows the use of more project based generated credits within the EU ETS once an ambitious post 2012 agreement is concluded.

scholarly journals New Continuum of High Volatile Currency Spillover During EU-BREXIT

2021 ◽  
Vol VI (II) ◽  
pp. 77-86
Author(s):  
Javed Satti ◽  
Zaheer Abbas
Keyword(s):  
High Frequency ◽  
High Frequency Data ◽  
Frequency Data ◽  
Index Approach ◽  
Window Technique ◽  
Rolling Window ◽  
Managerial Implications ◽  
The Impact ◽  
Turkish Lira ◽  
The Eu

In this study, the researchers observed the impact of Brexit on the Pound and its spillover to other European countries, likely to be affected during that period. The intraday high-frequency hourly return data of chief monies as Great Britain Pound (GBP), Euro (EUR), Danish Krone (DDK), Hungarian Forint (HUF), Turkish Lira (TRY), Swiss Franc (CHF), Swedish Krona (SEK), and Polish Zloty (PLN), for two months and one day, was utilized. The Intraday volatility spillover index approach and a further rolling window technique applied. The analysis of high-frequency data revealed that four currency pairs as TRY/USD, DKK/USD, PLN/USD, and HUF/USD, are highly volatile currencies. However, three pair currencies as GBP/USD, EUR/USD, and SEK/USD, are comparatively lesser volatile. The results and managerial implications reflect preparedness dynamics and proactiveness for a new continuum project that regional transmission effects of volatility spread from one currency to other currencies in the EU during Brexit.

scholarly journals Use of Mulifactor Models with Garch Structure in Carbon Emissions Risk Management

2018 ◽  
Vol 1 (1) ◽  
pp. 407-413
Author(s):  
Aneta Włodarczyk ◽  
Marta Kadłubek
Keyword(s):  
Risk Management ◽  
Carbon Emission ◽  
Phase Iii ◽  
Management Process ◽  
Eu Ets ◽  
Price Changes ◽  
Multifactor Models ◽  
Energy Companies ◽  
The Impact ◽  
The Eu

Abstract Tightening the environmental norms that result from the priorities of the EU 2030 Energy and Climate Package and the reform of the EU ETS have caused the necessity to implement an effective system of managing the risk of carbon dioxide emission and integrate it with the existing enterprise management system. Evaluation of the direction and strength of correlation between EUA price changes and energy companies stock price returns is crucial from point of view the managerial staff making proper decisions about the use of the CO2 emission permits by energy companies. It is an important stage of carbon emission risk management process. The aim of this paper is to verify the possibility of use the multifactor models with GARCH structure as a tool supporting the carbon emission management process in energy companies. Empirical analysis is connected with the estimation of multifactor models with GARCH structure in the Phase II and Phase III of the EU ETS functioning for two groups of Polish energy companies: group of the Respect Index companies and others. Such an approach allows to check whether the Respect Index companies are more robust than others on the carbon emission risk, in particular the EUA price risk associated with the intensification works on modifying the EU ETS functioning. We found that the impact of EUA price changes on energy companies stock returns and their volatility is statistically insignificant in case of all Respect Index companies.

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