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| 1 |
ID:
103363
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2011.
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| Summary/Abstract |
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.
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| 2 |
ID:
109370
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2011.
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| Summary/Abstract |
This article provides jet fuel demand projections at the worldwide level and for eight geographical zones until 2025. Air traffic forecasts are performed using dynamic panel-data econometrics. Then, the conversion of air traffic projections into quantities of jet fuel is accomplished by using a complementary approach to the 'Traffic Efficiency' method developed previously by the UK Department of Trade and Industry to support the Intergovernmental Panel on Climate Change (IPCC, 1999). According to our main scenario, air traffic should increase by about 100% between 2008 and 2025 at the world level, corresponding to a yearly average growth rate of 4.7%. World jet fuel demand is expected to increase by about 38% during the same period, corresponding to a yearly average growth rate of 1.9% per year. According to these results, energy efficiency improvements allow reducing the effect of air traffic rise on the increase in jet fuel demand, but do not annihilate it. Jet fuel demand is thus unlikely to diminish unless there is a radical technological shift, or air travel demand is restricted.
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| 3 |
ID:
177361
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Against the background of climate change, oil-gas-coal companies are particularly concerned by the notion of stranded assets, i.e., the fact that known fossil reserves cannot be burnt should limitations on greenhouse gas emissions become more stringent. Those assets can suffer from unanticipated or premature write-downs, devaluations or conversion to liabilities. This paper simulates the impacts of carbon stranded assets for 17 major oil-gas-coal firms' value until the horizon 2050. The core of the paper is a stochastic model with stopping times that determines by initial conditions (reserves and extraction rates) which companies are left with ‘stranded assets.’ In the business-as-usual scenario, one-quarter of the Earth's capacity for absorbing emissions will be depleted by 2050. With stringent emissions-curbing policies, an environmental gain of 80% can be achieved. Without a restructuring of their business model, many oil-gas-coal companies stand out from our simulations as being particularly vulnerable to the financial risks of bankruptcies and default events.
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| 4 |
ID:
097198
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2010.
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| Summary/Abstract |
This article investigates the impact of news concerning the development of emissions trading in Australia (such as the Carbon Pollution Reduction Scheme (CPRS)) on wholesale electricity spot prices, by using a database of 117 news announcements from December 1, 1998 to July 1, 2009. As power producers constitute the bulk of the participants of the proposed Australian emissions trading scheme, regulatory changes (about allocation, banking, coverage, targets) are indeed likely to affect the five interconnected electricity markets in New South Wales, Queensland, South Australia, Victoria, and Tasmania. We assess these effects with an ARMA(1,1)-GARCH(1,1) model, where daily electricity spot prices are regressed against exogenous variables in the mean and variance equations. This article constitutes the first empirical analysis of Australian ETS news effects on electricity wholesale spot prices. Our results show two asymmetric types of news effects, depending on their information content.
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| 5 |
ID:
088022
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| Publication |
2009.
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| Summary/Abstract |
This article evaluates the impact of the 2006 compliance event on changes in investors' risk aversion on the European carbon market using the newly available option prices dataset. Thus, we aim at capturing the specific event that occurred on April 2007 as the European Commission disclosed the 2006 verified emissions data. Following the methodology existing for stock indices, we recover empirically risk aversion adjustments on the period 2006-2007 by estimating first the risk-neutral distribution from option prices and second the actual distribution from futures on the European Climate Exchange. Our results show evidence of a dramatic change in the market perception of risk around the 2006 yearly compliance event that has not been assessed yet.
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