Profiting from Regulation: An Event Study of the EU Carbon Market

We investigate the effect of cap-and-trade regulation of CO2 on firm profits by performing an event study of a CO2 price crash in the EU market. We examine returns for 90 stocks from carbon intensive industries and 600 stocks in the broad EUROSTOXX index. Firms in carbon intensive, or electricity intensive industries, but not involved in international trade were most hurt by the event. �This implies investors were focused on product price impacts, rather than compliance costs. We find evidence that firms’ net allowance positions also strongly influenced the share price response to the decline in allowance prices.Emissions Markets; Incidence of Taxation; Event Study

Profiting from Regulation: An Event Study of the EU Carbon Market

Tradable permit regulations have recently been implemented for climate change policy in many countries. One of the first mandatory markets was the EU Emission Trading System, whose first phase ran from 2005-07. Unlike taxes, permits expose firms to volatility in regulatory costs, but are typically accompanied by property rights in the form of grandfathered permits. In this paper, we examine the effect of this type of environmental regulation on profits. In particular, changes in permit prices affect: (1) the direct and indirect input costs, (2) output revenue, and (3) the carbon permit asset value. Depending on abatement costs, output price sensitivity, and permit allocation, these effects may vary considerably across industries and firms. We run an event study of the carbon price crash on April 25, 2006 by examining the daily stock returns for 90 stocks from carbon intensive industries and approximately 600 stocks in the broad EUROSTOXX index. In general, firms in industries that tended to be either carbon intensive, or electricity intensive, but not involved in international trade, were hurt by the decline in permit prices. In industries that were known to be net short of permits, the cleanest firms saw the largest declines in share value. In industries known to be long in permits, firms granted the largest allocations were most harmed.

Numerical computations of turbulence amplification in shock wave interactions

Numerical computations are presented which illustrate and test various effects pertinent to the amplification and generation of turbulence in shock wave turbulent boundary layer interactions. Several fundamental physical mechanisms are identified. Idealizations of these processes are examined by nonlinear numerical calculations. The results enable some limits to be placed on the range of validity of existing linear theories

A solvable class of quadratic 0–1 programming

AbstractWe show that the minimum of the pseudo-Boolean quadratic function ƒ(x) = xTQx + cTx can be found in linear time when the graph defined by Q is transformable into a combinatorial circuit of AND, OR, NAND, NOR or NOT logic gates. A novel modeling technique is used to transform the graph defined by Q into a logic circuit. A consistent labeling of the signals in the logic circuit from the set {0, 1} corresponds to the global minimum of ƒ and the labeling is determined through logic simulation of the circuit. Our approach establishes a direct and constructive relationship between pseudo-Boolean functions and logic circuits.In the restricted case when all the elements of Q are nonpositive, the minimum of ƒ can be obtained in polynomial time [15]. We show that the problem of finding the minimum of ƒ, even in the special case when all the elements of Q are positive, is NP-complete

Vertical Targeting and Leakage in Carbon Policy

This paper examines the intersection between two aspects of climate policy design. The first is the point of regulation: should it be placed on pollution sources, carbon-rich inputs, or consumers? The second aspect concerns the external effects of a local climate policy. Leakage occurs when partial regulation results in an increase in emissions in unregulated parts of the economy. Our model demonstrates how directly regulating polluters can increase foreign emissions while indirect regulation (either upstream or downstream of the pollution source) will decrease foreign emissions. The net effect on combined domestic and foreign emissions will depend on market elasticities

A compendium of NASA Aerobee sounding rocket launchings for 1966

Compendium of Aerobee sounding rocket launchings for 196

Profiting from Regulation: Evidence from the European Carbon Market

We investigate how cap-and-trade regulation affects profits. In late April 2006, the EU CO2 allowance price dropped 50 percent, equating to a € 28 billion reduction in the value of aggregate annual allowances. We examine daily returns for 552 stocks from the EUROSTOXX index. Despite reductions in environmental costs, we find that stock prices fell for firms in both carbon- and electricity-intensive industries, particularly for firms selling primarily within the EU. Our results imply that investors focus on product price impacts, rather than just compliance costs and the nominal value of pollution permits