Hedging and temporal permit issuances in cap-and-trade programs: The Market Stability Reserve under risk aversion

Cap-and-trade programs such as the European Union's Emissions Trading System (EU ETS) expose firms to considerable risks, to which the firms can respond with hedging. We develop an intertemporal stochastic equilibrium model to analyze the implications of hedging by risk-averse firms. We show that the resulting time-varying risk premium depends on the size of the permit bank. Applying the model to the EU ETS, we find that hedging can lead to a U-shaped price path, because prices initially fall due to negative risk premiums and then rise as the hedging demand declines. The Market Stability Reserve (MSR) reduces the permit bank and thus, increases the hedging value of the permits. This offers an explanation for the recent price hike, but also implies that prices may decline in the future due to more negative risk premiums. In addition, we find higher permit cancellations through the MSR than previous analyses, which do not account for hedging.     

Carbon Markets in China: Development and Challenges

China is attempting to initiate its own carbon market—an important market-based policy instrument which would determine the fate of global climate policy as the largest emitter of carbon dioxide across the world. This article looks at carbon trading development so far and examines the key challenges ahead in China. These past experiences—whatever from international CDM practice, or SO₂ emission trading and a domestic voluntary carbon market—have paved the solid way to build the existing ETS pilots similar to European Union Emissions Trading System (EU ETS). The investigation into China’s ETS pilots discovered some important and urgent issues such as the capsetting and deepening energy market reform.     

Carbon and energy prices under uncertainty: A theoretical analysis of fuel switching with heterogenous power plants

European power producers have a major influence on the EU ETS, given that both their CO₂ emissions and their EUA (European Union Allowance) allocations account for more than half of the total volumes of the scheme. Fuel switching is often considered as the main short-term abatement measure under the EU ETS. It consists in substituting combined cycle gas turbines (CCGTs) for hard-coal plants in power generation. Thereby coal plants run for shorter periods, and CO₂ emissions are reduced. This paper provides the first theoretical analysis of fuel switching, in a context where power plants involved are not equally efficient. We begin with a preliminary work using illustrative examples and sensitivity analyses, which enables us to observe how differences in the efficiency of power plants impact the cost of fuel switching, and how this is related to the level of switching effort. Based on this, we build a theoretical model taking into account the effect of differences in the efficiency of power plants involved in fuel switching. We also investigate the effect of the timing of fuel switching abatements, within the temporally defined environment of our dynamic model. Results demonstrate that the gas price and uncontrolled CO₂ emissions act together on the carbon price. We show that the influence of the gas price on the carbon price depends on the level of uncontrolled CO₂ emissions, due to heterogeneity of power plants that are used in the fuel switching process. Furthermore, we show that the time of occurrence of uncontrolled emissions matters so that shocks have a stronger impact when they occur in a period that is closed to the end of the phase.     

基于组合模型的江苏省居民用电量预测分析

研究利用时间序列基本分析方法ARIMA模型分析法、指数平滑ETS模型和神经网络自回归模型对江苏省居民每月用电量进行数据分析、处理、拟合、检验及预测,以2004年1月至2017年12月用电计量数据作为分析样本,使用R软件对该时间序列进行建模。对给出的数据建立ARIMA模型、ETS模型和NNAR神经网络自回归模型,接着利用MAE、RMSE、MAPE三个评价指标来衡量模型的优良度。尝试通过组合模型对2018年江苏省居民12个月的用电量进行预测,与实际值进行对比验证,发现权重模型的误差最小,选择作为最终预测模型。最后得出结论,组合模型的预测效果要优于非组合模型。     

时序分析在地下洞室变形监测数据处理中的应用

时序分析法是广泛应用于多领域的统计分析方法,在岩土工程数值分析当中也有广泛应用,SAS/ETS(Ti me Series Forecasting)时序分析系统是一种智能化时序分析工具,本文运用SAS数据挖掘工具中时序分析组件对某水电站地下引水发电系统原位监控位移时间序列进行时序预测分析。实践表明,SAS/ETS时序分析方法基本能反映出蕴涵在位移序列中的岩体变形规律,预测结果与实测结果一致,可以运用于工程实践。     

Is the EU ETS a Just Climate Policy?

The European Union Emissions Trading System (EU ETS) is in dire straits. Prone to design problems and suffering from the effects of the economic crises the scheme is criticised for its poor achievements. In this paper we will analyse some of the features of this situation from an ethical perspective. The major part is dedicated to the complications within each phase of the EU ETS and to the recent developments it has undergone. We will briefly discuss the remedies suggested by prominent commentators. Furthermore, any policy tool to tackle climate change should be evaluated in view of the profound equity issues that are inherent to the climate problem. We will evaluate the EU ETS according to two justice-based criteria, related to effectiveness and the distribution of the duties involved in climate change, respectively. We will conclude that the EU ETS, in its current form, clearly lacks fairness on both criteria. However, the biggest problem is the unwillingness of EU leaders to mend, what could be, a commendable climate policy tool. To that extent, we argue, those leaders are acting unjustly.     

德国碳排放权交易管理架构与职能*

德国是欧盟碳交易体系中最为重要的成员国，德国对欧盟碳交易体系的实践，对我国碳交易体系的建设和管理具有借鉴意义。本文综述德国对碳交易体系的管理与执行组织架构，以及欧盟碳交易体系在德国前两个阶段的执行情况，为我国碳交易体系的建立提供参考。     

THE IMPACT OF THE EU EMISSIONS TRADING SYSTEM ON COMPETITIVENESS AND CARBON LEAKAGE: THE ECONOMETRIC EVIDENCE

This paper carefully surveys the econometric literature that tests for competitiveness effects and related carbon leakage caused by the EU Emissions Trading System (EU ETS). The results of this literature tell us that to date there is no evidence of the EU ETS having had widespread negative or positive effects on the competitiveness of regulated firms, nor is there evidence of significant carbon leakage. However, the paper also identifies three important caveats to this general conclusion. Firstly, the evidence we have still largely refers to the first two trading periods, namely Phases I (2005–2007) and II (2008–2012). Secondly, some heterogeneity of estimated effects is observed, but patterns, notably sectoral patterns, hardly emerge. Thirdly, very little explored is whether the EU ETS has had long-term effects on the economy via investment leakage or firm dynamics. Further empirical studies investigating these long-term effects are particularly desirable.     

The EU ETS and corporate environmental abatement

This article studies the relationship between firm-level emissions-to-cap ratio (ETC) and environmental abatement, by using a unique and extensive data set of 10 762 installations covered by the European Union Emission Trading Scheme (EU ETS) matched to 5931 firms. We find that a shortage of emissions allowances is related to more abatement in later years while a surplus of emissions allowances results in worse subsequent environmental performance. This finding underscores the importance of reducing the global amount of allowances in the ETS system. Our results also suggest that stakeholder pressure and the creation of transparency concerning corporate environmental performance are likely to support the effectiveness of the system.     

Modelling risk premia in CO2 allowances spot and futures prices

This article analyzes the modelling of risk premia in CO₂ allowances spot and futures prices, valid for compliance under the EU Emissions Trading Scheme (EU ETS). Similarly to electricity markets, a salient characteristic of CO₂ allowances is that the theory of storage does not hold, as CO₂ allowances only exist on the balance sheets of companies regulated by the scheme. The main result features positive time-varying risk premia in CO₂ spot and futures prices, which are strictly higher for post-2012 contracts (€6–9/ton of CO₂) than for Phase II contracts (€0–6/ton of CO₂). Contrary to Benth et al.'s (2008) for electricity markets, a positive relationship between risk premia and time-to-maturity is found in the EU ETS. As for relative differences between CO₂ futures and spot prices, CO₂ futures traded between + 1% (December 2008 contract) and + 33% (December 2014 contract) above spot prices during February 2008–April 2009. Contrary to Bessembinder and Lemmon (2002) for the electricity market, a positive relationship between risk premia and the variance/skewness of CO₂ spot prices is found. The futures-spot bias to the EU ETS explains around 1–6% of the variance of CO₂ futures premia.