This chapter identifies the main price drivers of European Union Allowances (EUAs), valid for compliance under the European Union Emissions Trading Scheme (EU ETS) created in 2005 to regulate CO2 emissions of more than 10,000 high carbon-intensive installations across Member States. Based on key...

The creation of the EU ETS led to changes in the merit order of the different plants competing on the electricity grid, and in the fuel-switching opportunities in the UK. This country has the greatest potential for CO2 emissions reduction through fuel-switching within the EU, thanks to its...

This paper uses the E-simulate model of electricity generation to estimate how much the stacking order of different technologies changes when a carbon price is introduced. Different coal and gas price scenarios are explored, and some sensitivity analysis is made of the relative market share of...

This article investigates firms’ banking and pooling behaviors in the context of the EU Emissions Trading Scheme (EU ETS) during Phase I (2005-2007). It provides an overview of the questions raised at the firm-level by the introduction and implementation of the EU trading system in terms of...

This article investigates the modelling of the convenience yield in the European carbon market by using daily and intradaily measures of volatility. The convenience yield stems from differences in spot and futures prices, and can explain why firms hold inventories. The main findings are that (i)...

To improve risk management in the European Union Emissions Trading Scheme (EU ETS), the European Climate Exchange (ECX) has introduced option instruments in October 2006 after regulatory authorization. The central question we address is: can we identify a potential destabilizing effect of the...

To improve risk management in the European Union Emissions Trading Scheme (EU ETS), the European Climate Exchange (ECX) has introduced option instruments in October 2006 after regulatory authorization. The central question we address is: can we identify a potential destabilizing effect of the...

This article deals with the issue of banking and borrowing in the context of the European Union Emissions Trading Scheme (EU ETS) by attempting to provide a policy-oriented unifying theoretical framework. After describing the main features of the EU ETS, the core part of the article consists of...