Transactions in the European carbon market: a bubble of compliance in a whirlpool of speculation - Archive ouverte HAL Access content directly
Journal Articles Cambridge Journal of Economics Year : 2017

Transactions in the European carbon market: a bubble of compliance in a whirlpool of speculation

(1) , (2) , (1)
1
2

Abstract

The European Union Emissions Trading Scheme (EU ETS) is supposed to help regulated installations to cover their CO2 emissions by trading in allowances. In practice, the EU ETS is mainly a financial market used for hedging and speculation. This financial feature is regarded as a solution (hedging and liquidity) to a problem (the price risk and volatility imposed on installations) which the market has actually created itself. This paper provides an estimation of the real underpinning of the scheme, i.e. the needs of installations for allowances transfers to achieve compliance in the two first exchange periods. This estimation, which was singularly lacking in the literature, shows that compliance transactions become more and more marginal as market activity grows, and they are drowned in a whirlpool of speculation. This challenges the role of the carbon price, whether it reveals a financial and self-referential evaluation rather than the installations’ marginal abatement costs, the condition of cost-effectiveness expected from carbon trading.

Dates and versions

hal-02095629 , version 1 (10-04-2019)

Identifiers

Cite

Nathalie Berta, Emmanuelle Gautherat, Ozgur Gun. Transactions in the European carbon market: a bubble of compliance in a whirlpool of speculation. Cambridge Journal of Economics, 2017, 41 (2), pp.287-318. ⟨10.1093/cje/bew041⟩. ⟨hal-02095629⟩
65 View
0 Download

Altmetric

Share

Gmail Facebook Twitter LinkedIn More