Modeling the Price Dynamics of Co2 Emission Allowances

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

“…Both, oil and gas also drive emission allowance quotations: if, for example, the price of coal rises compared to gas, the latter will be preferred by power generators, resulting in lower CO 2 emissions (Paolella and Taschini, 2006). Exogenous factors uniquely influencing emission rights may be due to modifications of the legal framework as well as weather changes (Alberola and Chevallier, 2007;Benz and Trück, 2009). …”

An empirical model comparison for valuing crack spread options

“…20 The clean spark spread would be one such case. Here the role of carbon emission certificates would be crucial (see Benz andTrueck, (2009) andCarmona et al, (2012)). In the case of the clean or also dark spark spread, the underlyings are less correlated than they are in the case of the crack spread.…”

An empirical analysis of energy cost pass-through to CO 2 emission prices

“…Seifert et al (2008) adopt a stochastic equilibrium model to assess the dynamics of carbon spot prices in the EU ETS market and find evidence of time-and price-dependence in the volatility. Benz and Strück (2009) investigate the evolution of the EU allowance spot prices and show that the CO 2 price returns exhibit nonlinear dynamics which can be reproduced by Markov-switching models. Taking a different perspective, Chevallier (2010b) models the risk premia in the CO 2 allowance spot and futures prices under the EU ETS.…”