Banking and Borrowing in the EU ETS: An Econometric Appraisal of the 2005-2007 Intertemporal Market
Alberola, Emilie; Chevallier, Julien (2009), Banking and Borrowing in the EU ETS: An Econometric Appraisal of the 2005-2007 Intertemporal Market, International Journal of Energy, Environment, Economics, 17, 4, p. 1-16
TypeArticle accepté pour publication ou publié
External document linkhttp://halshs.archives-ouvertes.fr/halshs-00388071/fr/
Journal nameInternational Journal of Energy, Environment, Economics
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Abstract (EN)This article critically examines the EU ETS intertemporal market during its Phase I (2005-2007). We test the Hotelling rule as a key element of a competitive equilibrium to validate whether allowance prices rise at the same rate as the interest rate. Including readily observable characteristics of the EU ETS such as the presence of one endogenous structural break and the influence of other energy markets shocks, we argue the inter-period ban on banking undermines the ability of the EU ETS to provide efficient price signalling. We also find a significant relationship between allowance price changes and the expected scarcity of allowances approximated by the Ellerman-Parsons ratio. Finally, our results show evidence of institutional learning by market participants.
Subjects / KeywordsEllerman-Parsons Ratio; Hotelling rule; EU ETS; Banking; Emissions trading
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