Capital market response to emission rights returns: Evidence from the European power sector

Veith, Stefan; Werner, Jörg R.; Zimmermann, Jochen

doi:10.1016/j.eneco.2009.01.004

Cited by 150 publications

(116 citation statements)

References 50 publications

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“…In contrast to other studies using multifactor market model (Mo et al, 2013;Veith et al, 2009;Oberndorfer, 2009) 1 , which refer to the first and/or earlier years of the second commitment period (where EUA were given free of charge), the novelty of our research relies on the analysis of the total second commitment period and on the expansion of the analysis to the most up-to-date information of EU ETS Phase III (where emission allowances are auctioned). Furthermore, we expand the existing analysis by testing long-run and short run causalities through VECM and by testing if asymmetry and EUA effects are firm-specific.…”

Section: Introductionmentioning

confidence: 99%

“…Some scholars have concluded that the EU ETS has had a positive effect on power companies: Oberndorfer (2009), Veith et al (2009), Keppler and Cruciani (2010a), Mo et al (2012) and Chan et al (2013) found that EUA price variations and stock returns or revenue of the European electricity corporations are shown to be positively correlated. However, the particular effect of EUA price variations on electricity corporations' stock returns might vary with country (Oberndorfer 2009 found a significantly small negative relationship for Spain), EU ETS phase (Mo et al (2013) found a positive and negative correlation during phase I and II respectively), allocation of allowances over time (emission based or generation benchmark based) and power generation technology (Bode (2006) found that lignite-fired power plant operators had the highest positive impact by using an emission based approach, whereas the gas-fuelled plant operators obtained it by using a generation benchmark as basis for the allocation).…”

Section: Introductionmentioning

confidence: 99%

“…of any possible factor on corporate value change. In fact, Veith et al (2009), Oberndorfer (2009 or Mo et al (2013) have used multifactor market models to investigate the impact of EUA price variations on firms' stock returns. The basic model employed takes the following form:…”

Section: Introductionmentioning

confidence: 99%

“…We focus on the multifactor market model, which has been widely used to study the effect of EUA prices (and others variables as fuel prices and electricity prices) on power stock market returns (Mo et al, 2013;Veith et al, 2009;Oberndorfer, 2009).…”

Section: Introductionmentioning

confidence: 99%

“…For example, Veith et al (2009) Being P t coal , P t oil , P t gas and P t elect , coal, oil, gas and electricity prices respectively and Ir t the long-term interest rate.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Firm-specific impacts of CO2 prices on the stock market value of the Spanish power industry

2016

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EU ETS impacts on stock market returns of Spanish power sector. Long-run positive effect of EU ETS on market returns is found only in Phase II. No short-run effects were found. EUA price effect is company-specific. a r t i c l e i n f o b s t r a c tEuropean Union carbon emissions allowances (EUA) price fluctuations can affect electricity companies' stock market values as these oscillations may change firms' profitability and thus investors' decisions. This outcome can differ not only contingent on the EU ETS Phase, but also on firms' generation mix. Moreover, stock markets may react differently to EUA increases in comparison to decreases, thus asymmetrically.By using daily data from January 2008 to July 2014, this article analyses long-run equilibrium relations and short-run interactions between the aggregated electricity industry stock market returns and EUA price changes. Moreover, we test if the relationship between EUA price variations and electricity stock returns is asymmetric and if the carbon price effect and the asymmetry are power firm-specific.Adding to earlier studies, we initially provide an inspection of the individual impact of EU ETS Phase II and on-going Phase III; followed by a comparative analysis between power firms which core activity relies on renewable energy sources and those whose sources are fundamentally non-renewable ones.A statistically significant positive long-run impact of EU ETS on the aggregated power sector stock market return is found concerning Phase II and works asymmetrically. Moreover, evidence is provided demonstrating that asymmetry and EUA effects are power firm-specific.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

“…For example, Veith et al (2009) Being P t coal , P t oil , P t gas and P t elect , coal, oil, gas and electricity prices respectively and Ir t the long-term interest rate.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Firm-specific impacts of CO2 prices on the stock market value of the Spanish power industry

2016

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Appendix A Supplemental Readings

2015

An Integrated Approach to Environmental Management

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The influence of carbon cost pass through on the link between carbon emission and corporate financial performance in the context of the European Union Emission Trading Scheme

2018

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In this study we examine, within the context of the European Union Emission Trading Scheme, whether firms' ability to pass through carbon costs affects the link between carbon emission and corporate financial performance. Our results, controlling for the endogenous relationship between carbon emission and financial performance, and robust to a number of alternative financial performance measures, demonstrate that good carbon emission performance does not always pay off. In fact, we find that lower levels of carbon emission are only rewarded if firms are not able to pass on carbon costs to consumers, either due to industry characteristics or firm‐specific carbon efficiency. Our results are in line with the view that as pollution is associated with increasing environmental costs, this negative impact of pollution on financial performance is mitigated for “carbon cost pass through” firms.

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Capital market response to emission rights returns: Evidence from the European power sector

Cited by 150 publications

References 50 publications

Firm-specific impacts of CO2 prices on the stock market value of the Spanish power industry

Firm-specific impacts of CO2 prices on the stock market value of the Spanish power industry

Appendix A Supplemental Readings

The influence of carbon cost pass through on the link between carbon emission and corporate financial performance in the context of the European Union Emission Trading Scheme

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