Interaction of European Carbon Trading and Energy Prices
- 1 June 2007
- preprint
- Published by Elsevier in SSRN Electronic Journal
Abstract
This paper addresses the economic impact of the EU Emission Trading Scheme for carbon on wholesale electricity and gas prices. Specifically, we analyse the mutual relationships between electricity, gas and carbon prices in the daily spot markets in the United Kingdom. Using a structural co-integrated VAR model, we show how the prices of carbon and gas jointly influence the equilibrium price of electricity. Furthermore, we derive the dynamic pass-trough of carbon into electricity price and the response of electricity and carbon prices to shocks in the gas price.Keywords
All Related Versions
This publication has 62 references indexed in Scilit:
- Investment risks under uncertain climate change policyPublished by Elsevier ,2007
- On the design of optimal grandfathering schemes for emission allowancesEuropean Economic Review, 2004
- Emissions trading and technology deployment in an energy-systems “bottom-up” model with technology learningEuropean Journal of Operational Research, 2004
- Industry-level emission trading between power producers in the EUApplied Economics, 2002
- Kyoto and technology at world level: costs of CO2 reduction under flexibility mechanisms and technical progressInternational Journal of Global Energy Issues, 2000
- Topics in Structural VAR EconometricsPublished by Springer Nature ,1997
- Common Stochastic Trends in a System of Exchange RatesThe Journal of Finance, 1989
- The Dynamic Effects of Aggregate Demand and Supply DisturbancesPublished by National Bureau of Economic Research ,1988
- Alternative explanations of the money-income correlationCarnegie-Rochester Conference Series on Public Policy, 1986
- Atheoretical macroeconometrics: A critiqueJournal of Monetary Economics, 1985