Price dynamics in the European Union Emissions Trading System and evaluation of its ability to boost emission-related investment decisions

Flora, Maria; Vargiolu, Tiziano

doi:10.1016/j.ejor.2019.07.026

Cited by 37 publications

(19 citation statements)

References 28 publications

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“…Hence, the firm can either continue paying the carbon price to account for their emissions, adjust its production or decide to exercise the option. In accordance with the existing literature (see Aïd and Biagini, 2023;Flora and Vargiolu, 2020;Huang et al, 2021), such investment should be understood as a switch to a different underlying technology, and we account for this by allowing the technology shock process to follow different dynamics after the investment.…”

Section: Introductionmentioning

confidence: 94%

Ein Soziologe und Jurist erinnert sich

Dammann¹,

Kühl²

2019

Die Fakultät Für Soziologie in Bielefeld

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This paper proposes and analyzes a stationary equilibrium model for a competitive industry which endogenously determines the carbon price necessary to achieve a given emission target.In the model, firms are identified by their level of technology and make production, entry, and abatement decisions. Polluting firms are subject to a carbon price and abatement is formulated as an irreversible investment, which entails a sunk cost and results in the firms switching to a carbon neutral technology. In equilibrium, we identify a carbon price and a stationary distribution of incumbent, polluting firms, that guarantee the compliance with a certain emission target. Our general theoretical framework is complemented with a case study with Brownian technology shocks, in which we discuss some implications of our model. We observe that a carbon pricing system alongside installation subsidies and tax benefits for green firms trigger earlier investment, while higher income taxes for polluting firms may be distorting. Moreover, we discuss the role of a welfare maximizing regulator, who, by optimally setting the emission target, may mitigate or revert some parameters' effects observed in the model with fixed limit.

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Section: Introductionmentioning

confidence: 94%

Ein Soziologe und Jurist erinnert sich

Dammann¹,

Kühl²

2019

Die Fakultät Für Soziologie in Bielefeld

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“…How to effectively reduce greenhouse gas emissions has been a hot topic in international politics, economy, and society. As a new mechanism, the carbon market is proved to effectively decrease the cost of emissions reduction, which has been adopted by numerous countries and regions (Flora & Vargiolu, 2020), including China. Along with the continuous expansion of the transaction scale, the carbon market has gradually evolved into an emerging financial market (B.…”

Section: Rationale Behind the Choice Of Empirical Datasetmentioning

confidence: 99%

Forecasting carbon price using a multi‐objective least squares support vector machine with mixture kernels

Zhu

Wang

et al. 2021

Journal of Forecasting

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For improving forecasting accuracy and trading performance, this paper proposes a new multi-objective least squares support vector machine with mixture kernels to forecast asset prices. First, a mixture kernel function is introduced into taking full use of global and local kernel functions, which is adaptively determined following a data-driven procedure. Second, a multi-objective fitness function is proposed by incorporating level forecasting and trading performance, and particle swarm optimization is used to synchronously search the optimal model selections of least squares support vector machine with mixture kernels. Taking CO 2 assets as examples, the results obtained show that compared with the popular models, the proposed model can achieve higher forecasting accuracy and higher trading performance. The advantages of the mixture kernel function and the multi-objective fitness function can improve the forecasting ability of the asset price. The findings also show that the models with a high-level forecasting accuracy cannot always have a high trading performance of asset price forecasting. In contrast, high directional forecasting usually means a high trading performance.

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“…Flora and Vargiolu [15] find that the variance-gamma process is the best fit for the carbon price dynamics.…”

Section: Introductionmentioning

confidence: 99%

The Downside and Upside Beta Valuation in the Variance-Gamma Model

Иванов

2021

ijaa

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The paper is aimed to assess the risks and gains of investment portfolio which relate to the impact of a particular asset. We consider the investment portfolios which consist of assets with variancegamma, gamma distributed and deterministic returns. The returns are assumed to be dependent. We derive analytical formulas for the downside and upside betas in the discussed framework. The established formulas depend on the values of a number of special mathematical functions including the values of the generalized hypergeometric ones.

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Price dynamics in the European Union Emissions Trading System and evaluation of its ability to boost emission-related investment decisions

Cited by 37 publications

References 28 publications

Ein Soziologe und Jurist erinnert sich

Ein Soziologe und Jurist erinnert sich

Forecasting carbon price using a multi‐objective least squares support vector machine with mixture kernels

The Downside and Upside Beta Valuation in the Variance-Gamma Model

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