6533b824fe1ef96bd128160d
RESEARCH PRODUCT
EUA and sCER Phase II Price Drivers: Unveiling the reasons for the existence of the EUA-sCER spread
Maria Mansanet-batallerMorgan Hervé-mignucciJulien ChevallierEmilie Alberolasubject
ArbitrageFinancial economics020209 energy02 engineering and technologyManagement Monitoring Policy and Law7. Clean energyClean Development MechanismEUA-sCER spreadEmissions markets0502 economics and business0202 electrical engineering electronic engineering information engineeringEconomics050207 economicsComputingMilieux_MISCELLANEOUS[SDV.EE]Life Sciences [q-bio]/Ecology environment05 social sciencesInternational economicsMarket microstructure[SHS.ECO]Humanities and Social Sciences/Economics and FinanceGeneral Energy13. Climate actionPosition (finance)[SHS.GESTION]Humanities and Social Sciences/Business administrationKyoto ProtocolArbitrageEmissions tradingdescription
International audience; This article studies the price relationships between EU emissions allowances (EUAs) - valid under the EU Emissions Trading Scheme (EU ETS) - and secondary Certified Emissions Reductions (sCERs)--established from primary CERs generated through the Kyoto Protocol's Clean Development Mechanism (CDM). Given the price differences between EUAs and sCERs, financial and industrial operators may benefit from arbitrage strategies by buying sCERs and selling EUAs (i.e. selling the EUA-sCER spread) to cover their compliance position as industrial operators are allowed to use sCERs towards compliance with their emissions cap within the European system up to 13.4%. Our central results show that the spread is mainly driven by EUA prices and market microstructure variables and less importantly, as we would expect, by emissions-related fundamental drivers. This might be justified by the fact that the EU ETS remains the greatest source of CER demand to date.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2011-03-01 |