Dealing with a new topic around the climate change finance, we present the carbon market and its mechanism, focussing on the link between the EUA and the CER markets as well as explaining the challenges of carbon regulation and the economy of primary and secondary CERs. Assuming polluting...

This paper presents a stochastic equilibrium model for environmental markets that allows us to study the characteristic properties of emission permit prices induced by the design of today's cap-and-trade systems. We characterize emission permits as highly nonlinear contingent claims on...

The market of emission allowances and their derivatives has boomed up for the last few years. This article is focused on the price dynamics of the emissions market and the valuation of the European options of allowance futures. Under risk-neutral framework and assuming quasi-static forward...