Financials threaten to undermine the functioning of emissions markets

Quemin, Simon; Pahle, Michael

doi:10.1038/s41558-022-01560-w

Cited by 16 publications

(6 citation statements)

References 67 publications

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“…Second, market imperfections or regulatory distortions including limited foresight, excessive discounting or insufficient policy credibility may distort price formation and anticipation downwards in the short to mid term (e.g., Fuss et al, 2018;Quemin and Trotignon, 2021). Third, carbon price formation may be driven by various factors other than fundamentals, making it difficult to predict future prices (e.g., Friedrich et al, 2020;Quemin and Pahle, 2023).…”

Section: Data Availabilitymentioning

confidence: 99%

Long-Term Issues with the Energy-Only Market Design in the Context of Deep Decarbonization

Lebeau,

Petitet,

Quemin

et al. 2023

SSRN Journal

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Section: Data Availabilitymentioning

confidence: 99%

Long-Term Issues with the Energy-Only Market Design in the Context of Deep Decarbonization

Lebeau,

Petitet,

Quemin

et al. 2023

SSRN Journal

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“…Although financial intermediaries such as banks have always been active and played a key hedging market-making function in the EU ETS (Cludius & Betz 2020), numerous new types of financial actors recently entered the market concurrently with the reinforcement of both the MSR and overall emissions cap stringency (ESMA 2022). However, their trading motives and strategies are little known, and adequate analysis tools are wanting (Quemin & Pahle 2023). Importantly, this also applies to nonfinancial, noncompliance actors whose trading behavior is heterogeneous and can at times resemble that of some financial actors (Lausen et al 2022).…”

Section: Accounting For Noncompliance Market Participantsmentioning

confidence: 99%

“…In spite of this, however, allowance markets are seldom studied from a financial market perspective or with frameworks using a market microstructure of heterogeneous agents with different trading motives and behaviors (Friedrich et al 2020b, Quemin & Pahle 2023. On the empirical front, notable exceptions include studies by Lucia et al (2015), Rannou & Barneto (2016), Joëts (2017), andFriedrich et al (2020a).…”

Section: Accounting For Noncompliance Market Participantsmentioning

confidence: 99%

The Market Stability Reserve in the EU Emissions Trading System: A Critical Review

Borghesi

Pahle

Perino

et al. 2023

Annu. Rev. Resour. Econ.

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Having experienced low prices for about a decade, the European Union Emissions Trading System has been supplemented with the market stability reserve (MSR) that adjusts the supply of allowances to market outcomes. We critically review the literature assessing the performance of the MSR against several policy objectives. In doing so, we cover both conceptual aspects and quantitative assessments. We conclude by pointing out important policy implications and open issues for further research. Expected final online publication date for the Annual Review of Resource Economics, Volume 15 is October 2023. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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“…Similar in spirit to our Proposition 3, Perino et al (2020) and Gerlagh et al (2021) show that overlapping demand-reducing policies can cause an increase in emissions by ETS-regulated industries. Gerlagh and Heijmans (2019) and Quemin and Pahle (2023) discuss how strategic agents may seek to manipulate the MSR to their own advantage. Tietjen et al (2021) show that the MSR may undesirable consequences for the 3 While cap-and-trade is mostly used to regulate pollution, tradable quotas also find application in the regulation of fisheries.…”

Section: Introductionmentioning

confidence: 99%