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First evidence of asymmetric cost pass-through of EU emissions allowances: Examining wholesale electricity prices in Germany

By Georg Zachmann, Christian Von Hirschhausen, Georg Zachmann and Prof Christian Von Hirschhausen

Abstract

This paper applies the literature on asymmetric price transmission to the emerging commodity market for EU emissions allowances (EUA). We utilize an error correction model and an autoregressive distributed lag model to measure the relationship between CO2 price changes and the development of wholesale electricity prices. Using data from the German market for electricity and EUAs, we find that the rising prices of EUAs have a stronger impact on wholesale electricity prices than falling prices-- the first empirical evidence of asymmetric cost pass-through for these new allowances. Keywords: JEL

Year: 2008
OAI identifier: oai:CiteSeerX.psu:10.1.1.352.2377
Provided by: CiteSeerX
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