This paper analyzes jointly the time series of European Union Allowances (EUAs) and Certified Emissions Reductions (CERs) in a Markov regime-switching environment. The purpose consists in capturing the interactions between the two time series - which have been highlighted in previous literature...

EUAs are European Union Allowances traded on the EU Emissions Trading Scheme (EU ETS), while Certified Emissions Reductions (CERs) arise from the Clean Development Mechanism under the Kyoto Protocol. These emissions assets attract an increasing attention among brokers, investors and operators on...