The efficiency of CO2 market in the phase III EU ETS: analyzing in the context of a dynamic approach

Ghazani, Majid Mirzaee; Jafari, Mohammad Ali

doi:10.1007/s11356-021-15044-5

Cited by 11 publications

(3 citation statements)

References 44 publications

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“…The efficient-market hypothesis states that stock price reflects all of the information needed in making investment decisions. Mirzaee Ghazani and Jafari (2021) suggested that stock price may not reflect carbon emissions, hence an emission-trading system can help to detect the capacity to produce certainty in emissions reduction. Similarly, it is necessary to analyze whether carbon-emission efficiency is genuinely represented in stock price.…”

Section: Research Questionsmentioning

confidence: 99%

Sustainable Blueprint: Do Stock Investors Increase Emissions?

Shobande

Ogbeifun

2022

JRFM

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The lack of agreement on climate policies among stock-market investors has raised significant concerns about GHG-emission levels, likely reflected in asset pricing. This study uses annual data sourced from the World Bank from 1980 to 2019 to examine whether stock-market investments increase GHG emissions in Organization for Economic Co-operation and Development (OECD) countries. The study employs the panel-standard fixed effects and the Arellano-Bover and Blundell–Bond dynamic methods and shows that stock-investor confidence is critical for emissions reduction in OECD countries. Additionally, the results highlight the potential mechanism through which the stock market can influence emissions in the OECD countries. We recommend that investors re-evaluate the emissions criteria before selecting long stock portfolios. Additionally, there is a need for policymakers to promote the preservation of environmental quality by carefully redesigning policies for stock-market investments.

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Section: Research Questionsmentioning

confidence: 99%

Sustainable Blueprint: Do Stock Investors Increase Emissions?

Shobande

Ogbeifun

2022

JRFM

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“…Accordingly, a point of departure for testing the market efficiency should be the relationship between carbon spot and futures prices. Although some researches on Phase Ⅰ indeed follow this point (Daskalakis and Markellos, 2008;Chevallier, 2010;Joyeux and Milunovic, 2010), it is omitted by those on Phase Ⅱ and Ⅲ (Rittler, 2012;Charles et al, 2013;Tang et al, 2013;Stefan and Wellenreuther, 2020;Ghazani and Jafari, 2021). The latter mainly focus on the performance of certain carbon futures contracts but pay no attention to the two price series, thus severing the inherent link between the two prices and disregarding the original intention of establishing the EU carbon futures market.…”

Section: Introductionmentioning

confidence: 98%

Re-examining the efficiency of the EU carbon futures market in phase Ⅱ: price discovery and intertemporal arbitrage

Xi,

Pan,

Qin

2023

Front. Energy Res.

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Introduction: Carbon futures market plays an important role in energy conservation and emission reduction of energy-intensive firms, and its efficiency is largely reflected by the dynamic relationship between carbon spot and futures prices. Even though the EU carbon futures market has undergone three phases, its efficiency in Phase Ⅱ still contains much controversy.Methods: Based on the cost-of-carry model, we apply linear and nonlinear Granger causality test, vector error correction model and threshold vector error correction model to re-examine the efficiency of the carbon futures market in the second phase of the European Union Emissions Trading System from the perspectives of price discovery and intertemporal arbitrage.Results: i) the EU carbon futures market has the function of price discovery by virtue of the broad scope of participants and the consequent huge liquidity, suggesting that the carbon futures price can predict the carbon spot price; ii) the coefficient requirement of the cost-of-carry model is satisfied and the relationship between the European Union Allowance (EUA) futures and spot prices is consistent with the cost-of-carry model, which indicates that the former is an unbiased estimator of the latter and an equilibrium relationship exists between the two prices so that the carbon futures market is efficient in the long run; iii) however, the carbon futures market shows inefficiency in the short run since it has an error correction function only when the basis is less than −0.07 and the carbon futures price indicates a remarkably slow adjustment to the long-run equilibrium when there is deviation, which can be ascribed to the global financial crisis as well as its aftermath in 2008.Discussion: In the context of global warming and carbon neutrality, the results of this paper are of great significance to emitters, arbitrageurs, hedgers and policymakers in emerging and young carbon markets.

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“…How effectively the ETS integrates the costs of carbon emissions is an important critical dimension [6]. In this regard, a recent study showed a gradual improvement [7] due to the various corrective actions implemented over the years to reduce the risk of carbon leakage. This phenomenon implies that emission reductions within the EU could be offset by a concomitant increase in emissions, although elsewhere, due to the shift of production to places with more permissive regulations [8,9].…”

Section: Introductionmentioning

confidence: 99%

Assessment of the European Emissions Trading System’s Impact on Sustainable Development

Di Foggia,

Beccarello,

Arrigo

2023

Sustainability

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This study explores the interaction between the emission trading system and the Sustainable Development Goals. Using an empirical analysis of a sample of European installations covered by the Emission Trading System from 2016 to 2021, we assessed how the system internalized the costs of carbon emissions across economic sectors and analyzed its impact on achieving the Sustainable Development Goals. The results revealed that while the increased efficiency of the emissions trading system had positive effects on environmental taxation and the reduction in economic losses due to climate change, challenges persist in natural resource use and energy dependence. This study offers new insight into the carbon ability pricing policies to properly allocate environmental costs. This study highlights the importance of integrating complementary policy instruments to strengthen effectiveness, given the link between the selected sustainable development and circular economy variables. The results provide stakeholders and policymakers with essential information for optimizing environmental policies and developing integrated approaches. If well implemented, such policies can effectively contribute to the fight against climate change and promote sustainable development by reducing social and environmental costs.

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The efficiency of CO2 market in the phase III EU ETS: analyzing in the context of a dynamic approach

Cited by 11 publications

References 44 publications

Sustainable Blueprint: Do Stock Investors Increase Emissions?

Sustainable Blueprint: Do Stock Investors Increase Emissions?

Re-examining the efficiency of the EU carbon futures market in phase Ⅱ: price discovery and intertemporal arbitrage

Assessment of the European Emissions Trading System’s Impact on Sustainable Development

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