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EU Emissions Trading by Energy Firms
According to the 'make-or-buy decision', transactions take place within firm boundaries when transaction costs are lower vis-à-vis the market. Analyzing EU Emissions Trading Scheme (EU ETS) transactions, this paper examines whether firms follow this make-or-buy principle by behaving self-sufficiently in terms of their carbon allowance demand before they opt for the carbon market. Contrary to our expectations, we find that firms with the potential to be most self-sufficient actually conducted fewer allowance trades across their subsidiaries than on the carbon market. This result may imply that within firm boundaries, pollution abatement capacity is more expensive and/or carbon-related transaction costs are higher than on the carbon market. For these firms, the coordination of abatement through the carbon market will thus be cost-effective. Moreover, their allowance trade is indicative of carbon hedging and seizing of arbitrage opportunities. We conclude that the firms with the potential to be most self-sufficient actually depend more on the EU ETS.
Matching EU ETS Accounts to Historical Parent Companies. A Technical Note
This note describes how Operator Holding Accounts (OHA) and Person Holding Accounts (PHA) from the European Union Emissions Trading System (EU ETS) were mapped to their respective parent companies. Its purpose is to provide users of our account-to-firm matching with detailed guidance on the construction and use of the dataset. Our goal is fully and systematically to link EU ETS accounts with their respective parent companies. Our work is based on information provided by Bureau van Dijk's Orbis database. We consider the full set of OHAs available in 2013. We consider the set of PHAs that performed transactions under the EU ETS during the period 2005-2007. We focus on the ownership situation during the period 2005-2007 for all accounts. We provide a combined variable capturing the parent company for the vast majority of EU ETS accounts from both the OHA and PHA groups of accounts during EU ETS Phase 1. Additionally, we provide disaggregated ownership information for each of the years 2005-2007. The information in this dataset provides users with the flexibility to easily connect to the appropriate Bureau van Dijk databases to obtain additional company data.
Modeling Carbon Spot and Futures Price Returns with GARCH and Markov Switching GARCH Models. Evidence from the First Commitment Period (2008-2012).
This paper makes use of spot and futures market data to carry out a thorough analysis of the dynamics of carbon price returns in the EU ETS for the whole first commitment period from 2008 to 2012. Understanding the properties of carbon price returns is especially crucial for industries which have to comply with an emission trading system and other market participants such as risk managers and speculators. We therefore seek to develop accurate models which capture the behavior of carbon price returns comprehensively. We apply a broad spectrum of GARCH model specifications, using different distributions for model innovations. As both time series, spot and futures price returns, exhibit asymmet...
