Influences from the European parliament on EU emissions prices

Deeney, Peter and Cummins, Mark and Dowling, Michael and Smeaton, Alan F. (2016) Influences from the European parliament on EU emissions prices. Energy Policy, 88. pp. 561-572. ISSN 0301-4215 (https://doi.org/10.1016/j.enpol.2015.06.026)

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Abstract

The decisions of the European Parliament (EP) are shown to influence both EU emission allowance (EUA) prices and volatility. Reductions in price and increases in volatility are observed when EP decisions are(i) not "party-political" in origin, (ii) made during times of low market sentiment, or (iii) made during times of low market attention. Daily EUA prices from 2007 to 2014 are used in the study, with decisions analysed using an event study approach for price impact, and a GARCH specification for volatility impact. Our findings suggest the need for policymakers to improve communication of long-term strategies for the EUA market. This aims to reduce the evident ongoing uncertainty experienced by traders around each decision made by the EP. The finding that sentiment and market attention at the time of an EP decision influences the market's reaction indicates a need to consider market dynamics in terms of decision timing, so that market turbulence is not an unintended by-product of an EP decision. Some form of medium term forward guidance may be called for.

  • Item type:Article
    ID code:82365
    Dates:
    Date
    Event
    31 January 2016
    Published
    3 December 2015
    Published Online
    15 June 2015
    Accepted
    Subjects:Social Sciences > Social Sciences (General)
    Department:UNSPECIFIED
    Depositing user: Pure Administrator
    Date deposited:15 Sep 2022 15:44
    Last modified:11 Apr 2024 02:32
    URI:https://strathprints.strath.ac.uk/id/eprint/82365
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