The Timeline of Trading Frictions in the European Carbon Market

Medina, Vicente; Tornero, Ángel Pardo; Pascual, Roberto

doi:10.2139/ssrn.1949259

Cited by 12 publications

(18 citation statements)

References 93 publications

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“…Their results indicate enhanced market transparency and increased market maturity. In addition, Medina et al (2014), within this line of research, evaluate the timeline of market liquidity in the European carbon market from Phase I to Phase II. Their findings question the generally assumed superiority of Phase II compared to Phase I, as they provide evidence of a long-lasting impact of the 2007 market collapse on the quality of the EU ETS.…”

Section: Introductionmentioning

confidence: 99%

Speculative and hedging activities in the European carbon market

2015

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Section: Introductionmentioning

confidence: 99%

Speculative and hedging activities in the European carbon market

2015

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“…2 , which shows that the trade network is characterized by a core of strongly connected agents from the finance industry (yellow nodes), surrounded by looser connected agents from the industry in the periphery of the graph. This structural asymmetry might be a reflection of the informational asymmetry on the ETS market which authors as ( Medina et al, 2014 ) have emphasized.…”

Section: Degree Distribution and Structure Of The Trading Networkmentioning

confidence: 99%

“…The hypothesis is rejected in all cases implying arbitrage possibilities and thus an inefficient functioning of the market. Medina et al (2014) investigate the performance of the market from a microstructure perspective. They show that trading frictions and volatility decreased from Phase I to Phase II but that the contribution of noise to volatility increased during Phase II, resulting in lower informational quality of the price changes.…”

Section: Related Literaturementioning

confidence: 99%

Price and network dynamics in the European carbon market

Karpf

Mandel

Battiston³

2018

Journal of Economic Behavior & Organization

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This paper presents an analysis of the European Emission Trading System as a transaction network. It is shown that, given the lack of well-identified trading institutions, industrial actors had to resort to local connections and financial intermediaries to participate in the market. This gave rise to a hierarchical structure in the transaction network. It is then shown that the asymmetries in the network induced market inefficiencies (e.g., increased bid-ask spread) and informational asymmetries, that have been exploited by central agents at the expense of less central ones. Albeit the efficiency of the market has improved from the beginning of Phase II, the asymmetry persists, imposing unnecessary additional costs on agents and reducing the effectiveness of the market as a mitigation instrument.

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“…Other studies have devoted particular attention to specific aspects or problems encountered by the EU ETS during its implementation, such as the over-allocation registered in the early phases (Sijm, 2005), the causes, components and consequences of the observed price volatility (Alberola et al, 2008;Chevallier, 2011;Medina et al, 2014;Gronwald and Hintermann, 2015), the drivers of the price fall in Phase II (Koch et al, 2014), the existence of frauds and monitoring problems (Frunza et al, 2011). These problems have generated a heated debate on the limitations of the EU ETS, which eventually led the European Commission to propose structural measures to reform the EU ETS (De Perthuis and Trotignon, 2014;Edenhofer et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

EU ETS facets in the net: Structure and evolution of the EU ETS network

Borghesi

Flori

2018

Energy Economics

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In this work, we investigate which countries have been more central during Phases I and II of the European Emission Trading Scheme (EU ETS) with respect to the di↵erent types of accounts operating in the system. We borrow a set of centrality measures from Network Theory's tools to describe how the structure of the system has evolved over time and to identify which countries have been in the core or in the periphery of the network. Performing partitions on the di↵erent types of accounts and transactions characterizing the EU ETS, we investigate whether intermediaries have a↵ected the overall structure of the system. From the analysis of the European Union Transaction Log data over the period 2005-2012, we find that some national registries (France, Denmark, Germany, United Kingdom, The Netherlands) were much more central than others in the network. Empirical evidence, moreover, shows that some account holders strategically opened additional accounts in the more central registries, thus reinforcing their centrality in the network. Finally, it turns out that Person Holding Accounts (PHAs) have played a prominent role in the transaction of permits, heavily influencing the configuration of the system. This motivates further research on the impact of non-regulated entities in the EU ETS design.

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The Timeline of Trading Frictions in the European Carbon Market

Cited by 12 publications

References 93 publications

Speculative and hedging activities in the European carbon market

Speculative and hedging activities in the European carbon market

Price and network dynamics in the European carbon market

EU ETS facets in the net: Structure and evolution of the EU ETS network

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