What Moves the European Carbon Market? - Insights from Conditional Jump Models

Price and Market Behavior in Phase II of the EU ETS: A Review of the Literature

“…15 Benz and Tru ¨ck (2009), Chevallier (2011), Feng, Zou, and Wei (2011), and Conrad, Rittler, and Rotfuß (2012 investigated and confirmed the partially stochastic behavior of allowance prices when there is clustering of volatility (e.g., periods of high volatility). Daskalakis, Psychoyios, and Markellos (2009) and Gronwald and Ketterer (2012) allow for the possibility of price jumps, and Gronwald, Ketterer, and Tru ¨ck (2011) estimate the relationship between allowance prices and financial markets by using copulas-a method that relaxes the assumptions concerning the underlying error structure. 16 Although it is not always straightforward to interpret the results of econometric studies that are not based on theoretical or conceptual models, what is clear from this literature is that even though the scarcity of CO 2 emissions allowances is institutionally induced, the allowance market itself appears to function very much like other commodity markets.…”

Analysis of the dynamics of carbon pricing: the role of speculation in the Emissions Trading System (ETS)

“…As a result, price volatility occurred during both the first and second stages of the trading session. This volatility raises uncertainty among EU-ETS users, prompting some to postpone costly investments in low-carbon technologies (see Gronwald & Ketterer, 2012;Gronwald & Hintermann, 2015).…”