Price drivers and structural breaks in European carbon prices 2005–2007

Options introduction and volatility in the EU ETS

“…This result is conform to previous literature (Mansanet-Bataller et al (2007), Alberola et al (2008)). …”

“…As highlighted in previous literature (Christiansen et al (2005), Mansanet-Bataller et al (2007), Alberola et al (2008), Chevallier (2009), the main risk-driving factors on the carbon market are linked to institutional decisions and energy prices. Another source of risk may be linked to the variation of global commodity markets, which may be captured by various indices.…”

Carbon Price Drivers: An Updated Literature Review

“…Moreover, emissions abatement costs from the power sector are assumed to be the lowest compared to other sectors, based on fuel-switching from coal to gas. Among other contributions, we may cite here Delarue and D'haeseleer (2007), Alberola et al (2008a), and Keppler and Mansanet-Bataller (2010) who have separately studied these causalities between CO 2 and electricity variables (such as clean dark and clean spark spreads, and the switch price) during the first phases of the EU ETS.…”

“…Alberola et al (2008a) provide a rigorous econometric analysis of such institutional effects, based on the detection of structural changes in the data, which may be dated back to the announcements by the European Commission during the so-called "first compliance event", which is due to happen on a yearly basis by May 15. Chevallier et al (2009) extended this analysis to the 2006 compliance event by using option price data.…”

“…Mansanet-Bataller et al (2007) and Alberola et al (2008a) were the first analyses to uncover econometrically the relations between energy markets and the CO 2 price. Based on phase I spot and futures data, the former group of authors establishes that carbon prices in the EU ETS are linked to fossil fuel (e.g., oil, gas, coal) use.…”