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2018 | Buch

An Introduction to the Book Kapitel lesen Erstes Kapitel lesen

Carbon Markets

Microstructure, Pricing and Policy

verfasst von: Dr. Gbenga Ibikunle, Prof. Andros Gregoriou

Verlag: Springer International Publishing

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft" , Springer Professional "Technik"

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Über dieses Buch

This book explores the microstructure of carbon markets and the pricing of carbon financial instruments generally. It provides a critical microstructure analysis of the EU Emissions Trading Scheme (EU-ETS), and also examines the theoretical and related market design issues affecting emissions trading schemes. Individual chapters analyse how intraday pricing evolves in carbon markets, the price impact of block trades in carbon financial instruments and their determinants, short and long-term liquidity effects in carbon markets, and the links between carbon market liquidity and efficiency. The aforementioned issues are explored using case studies of two major trading platforms operating within the EU-ETS. The book concludes by focusing on future policy and regulatory challenges in carbon markets, especially with respect to addressing pricing volatility challenges.

Inhaltsverzeichnis

Frontmatter
1. An Introduction to the Book
Abstract
This book is based on the insights gained from studies led by the authors between 2010 and 2015; a few of the studies are also extensively described in four of the chapters here. The focus of this book sits at the nexus of three interrelated fields of study: environmental policy, market microstructure and environmental financial economics. Specifically, three main issues (liquidity, price discovery and market efficiency) are investigated using data from the two major emissions permit trading venues within the European Union-Emissions Trading Scheme (EU-ETS). These two venues, along with several others in Europe, constitute the largest regional market for emission permits (see Daskalakis et al. 2011 for detailed discussions; Chap. 2 also provides a descriptive analysis of the market).
Gbenga Ibikunle, Andros Gregoriou
2. Emissions Trading in Europe: Background and Policy
Abstract
This chapter provides a background to emissions trading in Europe. The literature on cap and trade is reviewed from both theoretical and empirical perspectives. The operational structure of the EU-ETS is explored along with the critical issues relevant to its phases.
Gbenga Ibikunle, Andros Gregoriou
3. Price Discovery and Trading After Hours on the ECX
Abstract
This chapter investigates the impact of after-hours trading (AHT) on the magnitude and timing of price discovery on the world’s largest carbon trading platform, the ECX. Low volume trading in carbon financial instruments (CFI) can lead to disproportionately high levels of price discovery; however, the generated pricing has low-efficiency levels. This is associated with high levels of informed trades coupled with low levels of liquidity trades. Results obtained show evidence of higher trading volume per minute and higher price efficiency for after-hours when compared with regular trading hours (RTH). As a result of a higher proportion of informed trades, adverse selection costs for trades during the after-hours are significantly larger than those for trades during the regular trading day.
Gbenga Ibikunle, Andros Gregoriou
4. The Price Impact of Block Emissions Permit Trades
Abstract
This chapter examines the determinants of the price impact of €21 billion worth of block trades completed in the European carbon market between 2008 and 2011. Findings obtained show that wide bid-ask spreads and volatility are characterised by small price impacts. Large levels of price impact are more likely to occur during the middle of the trading day, specifically the four-hour period between 11 am and 3 pm than during other hours of the trading day. Purchase block trades induce relatively smaller price impact on a price run-up than sell block trades. Block futures trades in carbon markets generally induce lesser price impacts than in equity or conventional futures markets and a significant proportion of the effects contradict findings on block trades in those markets.
Gbenga Ibikunle, Andros Gregoriou
5. The Liquidity Effects of Trading Carbon Financial Instruments
Abstract
This chapter explores the liquidity effects of the introduction of a new regime of rules for the Kyoto commitment period (2008–2012) in the EU-ETS. Results obtained show evidence of a sustained increase in the liquidity of traded carbon financial instruments as a result of the new trading rules. However, we also find evidence of reductions in liquidity following regulatory changes after the commencement of the Kyoto commitment phase.
Gbenga Ibikunle, Andros Gregoriou
6. Liquidity and Market Efficiency in Carbon Markets
Abstract
This chapter examines the relationship between liquidity and market efficiency in carbon markets, by using analysing trading data from the world’s largest carbon exchange, the ECX. Results obtained show that there is a strong relationship between liquidity and market efficiency such that when spreads narrow, return predictability diminishes. This relationship is more pronounced for the highest trading carbon financial instruments and during periods of low liquidity. Since the start of trading in Phase II of the EU-ETS prices have continuously moved nearer to unity with efficient, random walk benchmarks, and this improves from year to year. Overall, findings suggest that trading quality in the EU-ETS has improved markedly and matured over the sample period (2008–2011).
Gbenga Ibikunle, Andros Gregoriou
7. The Future
Abstract
This chapter discusses the key issues/challenges identified in the preceding chapters from a policy perspective, and solutions are also proffered, using insights gained from analysis conducted in the book. The issues discussed include the designing of regulations for future compliance years and phases of the EU-ETS, the challenge posed by excess emissions permits in the system and the financial regulation of the EU-ETS and its trading platforms.
Gbenga Ibikunle, Andros Gregoriou
Backmatter
Metadaten
Titel
Carbon Markets
verfasst von
Dr. Gbenga Ibikunle
Prof. Andros Gregoriou
Copyright-Jahr
2018
Electronic ISBN
978-3-319-72847-6
Print ISBN
978-3-319-72846-9
DOI
https://doi.org/10.1007/978-3-319-72847-6