Relationship between <scp>US</scp> and <scp>B</scp>razilian ethanol prices: new evidence based on fractal regressions

Quintino, Derick David; Cantarinha, Ana; Ferreira, Paulo

doi:10.1002/bbb.2192

Cited by 7 publications

(7 citation statements)

References 32 publications

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“…Despite the positive correlation between Brazilian ethanol and international oil prices, a large part of the Brazilian ethanol supply is absorbed by domestic market demand, which tends to limit the transmission of international price shocks to domestic prices in the short term. The lower correlation between CBIOS prices and ethanol prices is in line with the results of Quintino et al ( 2021a ), who studied the EU Allowance (EUA) emission prices and Brazilian ethanol prices and showed that the relationship is weak and short term.…”

Section: Resultssupporting

confidence: 88%

“…Several studies, including those by David et al ( 2020 ), Hallack et al ( 2020 ), Nascimento Filho et al ( 2021 ), Quintino et al ( 2022 ), and Palazzi et al ( 2022 ), have investigated the impact of this policy on fuel prices. Additionally, Dutta and Bouri ( 2019 ) and Quintino et al ( 2021a ) have contributed to the understanding of price relationships of carbon emission prices in the context of the Brazilian sugarcane and ethanol sector.…”

Section: Introductionmentioning

confidence: 99%

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Exploring the potential of the carbon credit program for hedging energy prices in Brazil

Palazzi,

Quintino,

Ferreira

et al. 2024

Environ Sci Pollut Res

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The transition to a low-carbon economy is imperative to reduce reliance on fossil fuels and mitigate pollution emissions. This preposition also aligns with the United Nations Sustainable Development Goals (SDGs-13), which highlight the climate change action. In this vein, Brazil has implemented the Decarbonization Credit (CBIOS) program to incentivize biofuel production and promote environmental sustainability through carbon credit emissions. To this end, the present study evaluates the effectiveness of the CBIO contract as a hedging tool for investors in the face of energy price fluctuations and decarbonization efforts. Specifically, we employ conditional dynamic correlation (DCC-GARCH) and optimal hedge ratio (HR) techniques to assess the relationship between CBIO and the futures and spot prices of sugar, oil, and ethanol. Our findings suggest that the current CBIO contract is not an effective hedge against energy spot and future prices. However, our analysis identifies a strengthening correlation between ethanol traded in Chicago and CBIO over time, highlighting the potential for an underlying contract to serve as an effective hedging tool in the future. Our study adds to the existing literature on carbon pricing mechanisms and their impact on financial markets, emphasizing the importance of sustainable energy policies and their potential to mitigate the risks associated with energy price volatility and decarbonization efforts.

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Section: Resultssupporting

confidence: 88%

Section: Introductionmentioning

confidence: 99%

Exploring the potential of the carbon credit program for hedging energy prices in Brazil

Palazzi,

Quintino,

Ferreira

et al. 2024

Environ Sci Pollut Res

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“…Another recently explored topic is the possible relationship between Brazilian ethanol spot and futures prices at the Brazilian Exchange, B3 [14,15], as well as the possible relationship between ethanol prices in the Brazilian and USA markets [15][16][17][18][19].…”

Section: Literature Reviewmentioning

confidence: 99%

Relative Prices of Ethanol-Gasoline in the Major Brazilian Capitals: An Analysis to Support Public Policies

2022

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The use of biomass as an energy source has advanced in recent decades, given the scientific evidence that it is a solution to the environmental problems faced globally. In this context, biofuels derived from biomass have a prominent role. Among the countries where this alternative is the most promising, Brazil stands out, just behind the USA. It is, therefore, necessary to assess whether such a replacement is economically viable. For such an assessment, the behavior of the relative price of bioethanol/gasoline is crucial. In the present work, the degree of temporal persistence of relative prices, considering the existence of shocks to which they are exposed, is evaluated, considering 15 important Brazilian capitals, via the detrended fluctuation analysis (DFA). The degree of correlation is also evaluated through the detrended cross-correlation analysis (DCCA) between fuel prices in São Paulo, the capital of the most populous state and main producer of bioethanol, with the capitals of the 14 states selected for the analysis. The period of analysis takes place between 2004 and 2020. The use of DCCA with sliding windows was recently proposed and we also evaluate DFA dynamically in this way, and this, together with an extended sample in the context of Brazilian fuel prices, represents the main innovations of the present work. We found that the degree of persistence varies significantly depending on the capitals analyzed, which means that price variations are localized and demand regional stimulus policies. Furthermore, it was found that the correlation with São Paulo is less intense in the most geographically distant capitals. Such evidence is important and complementary to infer how integrated the national bioethanol market is, in order to support public policies aimed at its consolidation.

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“…determined whether the detection of structural breaks improves the forecast of future prices, and Dutta, 24 Hernandez et al 25 . and Quintino et al 26 . studied the relationship between Brazilian and US ethanol.…”

Section: Introductionmentioning

confidence: 99%

“…Notable recent contributions include Dutta 22,24 and Bouri et al 23 Considering the US market, bearing in mind that corn is used for the production of US ethanol, Dutta 22 studied whether the implied volatility of corn helps in predicting future corn price returns. With regard to US ethanol, Bouri et al 23 determined whether the detection of structural breaks improves the forecast of future prices, and Dutta, 24 Hernandez et al 25 and Quintino et al 26 studied the relationship between Brazilian and US ethanol. Concerning the price of sugar, Amrouk and Heckelei 27 used a Bayesian model to make forecasts of international sugar prices.…”

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confidence: 99%

An investigation into the relationship between sugarcane and grain prices in Brazil: a fractional cointegration approach

Quintino¹,

Yaya

Ogino

et al. 2023

Biofuels Bioprod Bioref

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We investigate cointegration in prices of corn, soybean and sugarcane in Brazil using a fractional integration analysis, fractional cointegration in a pairwise set‐up and fractional cointegrating vector autoregressive (FCVAR) set‐up. Monthly real prices of sugarcane, corn and soybean are considered, in the period between March 2006 and May 2022. The results of fractional integration first show that the prices of these agricultural commodities are non‐mean reverting, and cointegrated in a pairwise fractional sense. The results, based on the FCVAR model, show the prices of the three commodities moving in different directions, that is, sugarcane and soybean negatively, while sugarcane and corn, and corn and soybean move in positive directions. The positive relationship between sugarcane and corn has implications for the ATR (‘açúcar total recuperável’ – total recoverable sugar, TRS) pricing of derivatives of two commodities, such as sugar and ethanol. Also, corn and soybean are close substitutes and are expected to have similar pricing dynamics over time.

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Relationship between US and Brazilian ethanol prices: new evidence based on fractal regressions

Cited by 7 publications

References 32 publications

Exploring the potential of the carbon credit program for hedging energy prices in Brazil

Exploring the potential of the carbon credit program for hedging energy prices in Brazil

Relative Prices of Ethanol-Gasoline in the Major Brazilian Capitals: An Analysis to Support Public Policies

An investigation into the relationship between sugarcane and grain prices in Brazil: a fractional cointegration approach

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