On the links between stock and commodity markets' volatility

The aim of this paper is to investigate the determinants of the carbon price during the two phases of the European Union Emission Trading Scheme (EU ETS). More specifically, relying on daily EU allowance futures contracts, we test whether the carbon price drivers identified for Phase I still hold for Phase II and evolve toward a long-run relationship. Using cointegration techniques and accounting for the 2006 structural break on the carbon market, we show that while a cointegrating relationship exists for both phases of the EU ETS, the nature of this equilibrium relationship is different across the two subperiods, with an increasing role of fundamentals in Phase II. Deriving equilibrium values, we show that the carbon price tends to be undervalued since the end of 2009.

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The creation of electricity markets has raised the fundamental question as to whether markets create the right incentives for the provision of the reserves needed to maintain supply security in the short-run, or whether some form of regulation is required. In some states in the US, electricity distributors have been made responsible for providing such reserves by contracting capacity in excess of their forecasted peak demand. The so-called Installed Capacity Markets provide one means of contracting reserves, and are the subject of this paper. Under monopoly as well as under perfect competition, we identify firms' short-run opportunity costs of committing resources in the capacity market and the costs of inducing full capacity commitment. The long-run investment problem is not considered. From a welfare viewpoint, we also compare the desirability of providing reserves either through capacity markets or through the demand side (i.e. power curtailments). At the optimum, capacity obligations equal peak demand (plus expected outages) and the capacity deficiency rate (which serves as a price cap) is set at firms' opportunity costs of providing full capacity commitment.

This paper surveys the existing theoretical and empirical research on long term contracts inspired by the American experience. We analyze the role of take-or-pay clauses and price indexation rules, questioning whether regulation distorts optimal contract duration. The models we summarize allows us to discuss the economic fundamentals of the ED provisions on long-term contracts in the natural gas industry, pointing out that the ED position on long-term contracting seems to mix up contract duration and flexibility. L LONG TERM TAKE-DR-PAY CONTRACTSAccording to Williamson (1979), when a transaction entails one party committing capital that has little value for other uses, the other party has a strong incentive to appropriate the rents arising from the relationship through opportunistic behavior. Anticipating this risk, also called the "hold-up" problem, buyers and sellers sign long-term contracts.The main drawback of simplistic long-term contracting is inflexibility in the face of demand and supply fluctuations. To mitigate this problem, parties will therefore stipulate specific clauses. In practice, an initial price constitutes a floor on the value of the contract. Prices are rigid downward, but they can raise following price escalators, like predefined increases per year or petroleum price index. In addition, redetermination clauses permit renegotiation of the terms ofthe contract at predetermined intervals.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Defining the Abatement Cost in Presence of Learning-by-doing: Application to the Fuel Cell Electric Vehicle. Terms of use: Documents in AbstractThe transition of a sector from a pollutant state to a clean one is studied. A green technology, subject to learning-by-doing, progressively replaces an old one. The notion of abatement cost in this dynamic context is fully characterized. The theoretical, dynamic optimization, perspective is linked to simple implementation rules. The practical "deployment" perspective allows to study sub-optimal trajectories. Moreover, the analysis of the launching date provides a definition of a dynamic abatement cost easy to use for evaluation of real-world policy options. The case of Fuel Cell Electric Vehicles offers an illustration of the proposed methodology. JEL-Codes: Q550, Q420, C610.

The paper employs an event study methodology to investigate the macroeconomic announcements effects on S&P500 and oil prices. Our results provide evidence of a significant impact of the US macroeconomic news on oil prices. This impact is split into two components, namely the direct effect (common response) and indirect effect (volatility transmission). Altogether our results show that the volatility transmission is bidirectional since a significant volatility transmission from the oil market to the US stock market is revealed. Furthermore, a higher volatility transmission is recorded from the oil market to the stock market especially after the release of consumption indicators.