Causalities between CO2, electricity, and other energy variables during phase I and phase II of the EU ETS

By J. Keppler, M. Mansanet-Bataller. 2010

216 citations recorded by the source corpus.

The topic of this article is the analysis of the interplay between daily carbon, electricity and gas price data with the European Union Emission Trading System (EU ETS) for CO2 emissions. In a first step we have performed Granger causality tests for Phase I of the EU ETS (January 2005 until December 2007) and the first year of Phase II of the EU ETS (2008). The analysis includes both spot and forward markets—given the close interactions between the two sets of markets. The results show that during Phase I coal and gas prices, through the clean dark and spark spread, impacted CO2 futures prices, which in return Granger caused electricity prices. During the first year of the Phase II, the short-run rent capture theory (in which electricity prices Granger cause CO2 prices) prevailed. On the basis of the qualitative results of the Granger causality tests we obtained the formulation testable equations for quantitative analysis. Standard OLS regressions yielded statistically robust and theoretically coherent results.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/a3218a28fafd24a6ac1a72a7affcebeb683a2d7f

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Citations in the corpus

Risk Spillovers across the Energy and Carbon Markets and Hedging Strategies for Carbon Risk (2016, background): “The finding of a significant electricity market effect on the carbon price is consistent with Keppler and Mansanet-Bataller (2010) and Sousa and Aguiar-Conraria (2014).”
Dynamics of China’s carbon prices in the pilot trading phase (2017, background): “First, the four pilots examined in the study exhibit mixed results in terms of their 7 Another energy variable that has been found to be important in the EU-ETS is the fuel-switching behaviour of power companies between coal and gas (Delarue et al. , 2010; Keppler and Mansanet-Bataller, 2010).”
Trade Openness and Carbon Emissions: Evidence from Belt and Road Countries (2019, background): “[41] in the UK; in Brazil, Russia, India, China, and South Africa (BRICS) by Pao et al.”