Energy markets and CO2 emissions: Analysis by stochastic copula autoregressive model

Abstract

ADInternational audienceWe examine the dependence between the volatility of the prices of the carbon dioxide “CO2” emissions with the volatility of one of their fundamental components, the energy prices. The dependence between the returns will be approached by a particular class of copula, the SCAR (Stochastic Autoregressive) Copulas, which is a time varying copula that was first introduced by Hafner and Manner (2012) [1] in which the parameter driving the dynamic of the copula follows a stochastic autoregressive process. The standard likelihood method will be used together with EIS (Efficient Importance Sampling) method, to evaluate the integral with a large dimension in the expression of the likelihood function. The main result suggests that the dynamics of the dependence between the volatility of the CO2 emission prices and the volatility of energy returns, coal, natural gas and Brent oil prices, do vary over time, although not much in stable periods but rise noticeably during the period of crisis and turmoils

Assessing the impact of ETS trading profit on emission abatements based on firm-level transactions

“…This finding agrees with the extant macroeconomic literature that suggests the increasing maturity of EU ETS 7,8 . Stable value realization of emission abatements facilitates the financial management of carbon allowances, which are widely recognized as financial assets [39][40][41][42][43][44] that influence a series of energy commodities such as crude oil and natural gas 29 .…”

“…Previous studies investigated various aspects related to the operation of the EU ETS, including market efficiency [7][8][9] , allowance allocation [9][10][11] , pricing mechanism [12][13][14][15][16][17][18][19][20] , trade frictions 21 , and market stability reserve 22 . Moreover, the EU ETS has an influence on stock markets [23][24][25][26] , energy markets [27][28][29][30][31] , and energy-intensive industries such as power 32 , metallurgical 33 , and transport industries 34,35 . However, little effort has been exerted on the incentiving effect of allowance trading on abatements; the market incentives are supposed to motivate the emitters to spontaneously and continuously reduce their GHG emissions.…”

Time-frequency Connectedness between Coal Market Prices, New Energy Stock Prices and CO2 Emissions Trading Prices in China

“…Hammoudeh et al [20] utilize a quantile regression model to investigate the interaction between energy price and U.S. CET price and their empirical results show that the fluctuation of U.S. CET prices can be attributed to the natural gas, the crude oil, and the electricity prices. Marimoutou and Soury [21] show that the relationships between the energy market and the CO 2 emission market fluctuate over time. Hammoudeh et al [22] claim that the negative changes in coal prices can interpret the carbon market price better than the impact of positive changes in the short-term.…”

CO2 Emissions in China’s Yangtze River Economic Zone: A Dynamic Vector Autoregression Approach

“…The ARDL model was applied by Sohag et al [19] to explore the effect of Malaysia's resident consumption structure on carbon emissions. The stochastic copula autoregressive model was used by Marimoutou and Soury [20] to study the impact of energy price on CO 2 emissions. A crosssection regression analysis was carried out between the emission reduction plan and the major indexes analyzed at the European level [21].…”