Allowance Price Drivers in the First Phase of the EU ETS

In the first phase of the EU Emissions Trading Scheme (EU ETS), the price per ton of CO2 rose to over €30 before decreasing to zero by mid 2007. I examine to what extent this variation can be explained by marginal abatement costs by deriving a structural model of the allowance price under the assumption of efficient markets. I then gradually relax the model by allowing for delayed adjustment of price to fundamentals, as well as by introducing lagged LHS variables. The pattern of the results suggests that prices were not initially driven by marginal abatement costs, but that this inefficiency was largely corrected by the first round of emission verifications.Emissions permit markets, air pollution, climate change, bubble, speculation, CO2, asset pricing, EU ETS

Market Power and Windfall Profits in Emission Permit Markets

Although market power in permit markets has been examined in some detail following the seminal work of Hahn (1984), the effect of free allocation on price manipulation with market power in both output and permit market has not specifically been addressed. I show that in this case, the threshold for free allocation above which dominant firms will increase the permit price is below their emissions. In addition to being of general economic interest, this issue is relevant in the context of the EUETS. I find that European power generators received free allowances in excess of the derived threshold.Market power, emissions permit markets, air pollution, EU ETS, CO2, electricity generation, permit allocation, windfall profits, cost pass-through

An Options Pricing Approach for CO2 Allowances in the EU ETS

If firms are unable to fully control their emissions, the cap in a permit market may be exceeded. Using stochastic aggregate emissions as the underlying I derive an options pricing formula that expresses the permit price as a function of the penalty for noncompliance and the probability of a binding cap. I apply my model to the EU ETS, where rapid market setup made it difficult for firms to adjust their production technology in time for phase 1. The model fits the data well, implying that the permit price was driven by firms hedging against stochastic emissions rather than marginal abatement costs.Permit markets, air pollution, climate change, CO2, options pricing, EU ETS

Market Effects of Voluntary Climate Action by Firms: Evidence from the Chicago Climate Exchange

Why do for-profit firms take voluntary steps to improve the environment? Brand appeal to green consumers or investors, the ability to influence or avoid regulation, or the experience gained for future regulation, have all been suggested as possible reasons. The empirical evidence is decidedly mixed. This paper uses 19 years of monthly stock price returns to examine the profitability of participation in the world’s largest voluntary greenhouse gas mitigation program: the Chicago Climate Exchange. After controlling for systemic market risk as well as industry-specific shocks, we find no statistically significant impact of announcing to join CCX on excess returns. However, the market appeared to be sensitive to changes in abatement costs implied by CCX membership. Most strikingly, the progress of proposed greenhouse gas legislation (the Waxman-Markey bill) had a positive impact on excess returns for CCX member firms, suggesting that the most profitable incentive for firms to join CCX is to prepare for future regulation. Our results imply that relying on voluntary approaches alone to combat climate change may not be enough.voluntary action, firm performance, climate change, permit markets

Market Power, Permit Allocation and Efficiency in Emission Permit Markets

Market power in permit markets has been examined in some detail following the seminal work of Hahn (Q J Econ 99(4):753-765, 1984), but the effect of free allocation on price manipulation with market power in both product and permit market has not been fully addressed. I show that in this case, the threshold of free allocation above which a dominant firm will set the permit price above its marginal abatement costs is below its optimal emissions in a competitive market, and that overall efficiency cannot be achieved by means of permit allocation alone. In addition to being of general economic interest, this issue is relevant in the context of the EU ETS. I find that the largest German, UK and Nordpool power generators received free allowances in excess of the derived threshold. Conditional on having price-setting power in both the electricity and permit markets, these firms would have found it profitable to manipulate the permit price upwards despite being net permit buyer

Pricing emission permits in the absence of abatement

If emissions are stochastic and firms are unable to control them through abatement, the cap in a permit market may be exceeded, or not be reached.  I derive a binary options pricing formula that expresses the permit price as a function of the penalty for noncompliance and the probability of an exceeded cap under the assumption of no abatement.  I apply my model to the EU ETS, where the rapid introduction of the market made it difficult for firms to adjust their production technology in time for phase 1.  The model fits the data well, implying that the permit price was at least partly driven by firms hedging against stochastic emissions

Anatomische Rekonstruktion des Außenbandkomplexes am Sprunggelenk

Zusammenfassung: Operationsziel: Rekonstruktion der Ligamenta fibulotalare anterius und fibulocalcaneare zur Wiederherstellung der Bandstabilität und Funktion in den Sprunggelenken. Indikationen: Chronische Verletzungsfolgen mit Instabilität und Beschwerden, konservativ nicht behebbar. Fehlendes Bandmaterial zur Rekonstruktion. Kontraindikationen: Konstitutionelle Laxität der Sprunggelenkbänder. Calcaneus varus ohne gleichzeitige Korrektur. Periphere Gefäßerkrankungen. Operationstechnik: Rekonstruktion der Bänder mit Hilfe eines etwa 18 cm langen Transplantats aus der Plantarissehne oder bei deren Fehlen aus den Zehenstrecksehnen III und IV. Das Transplantat wird über Bohrkanäle im Außenknöchel, Talushals und Kalkaneus an die anatomischen Ursprünge und Insertionen geführt und unter leichter Spannung mit sich selbst vernäht. Bandreste werden miteinbezogen. Ergebnisse: 42 Patienten mit 44 Sprunggelenken wurden operiert. 41 Patienten mit 43 Sprunggelenken konnten im Mittel nach 32 Monaten (neun bis 98 Monate) nachkontrolliert werden. 39 operierte Patienten (41 Sprunggelenke) waren sportlich so aktiv wie vor dem Eingriff; zwei Patienten (zwei Sprunggelenke) stellten ihre Sportaktivitäten aus anderen Gründen ein. Einer der 42 Patienten hatte postoperativ erneut ein schweres Distorsionstrauma erlitten, das unter konservativer Behandlung vollständig heilte. Nach dem <<Ankle-Hindfoot-Scale” (Tablelle 1) erreichten die 41 Patienten (43 Sprunggelenke) einen Punktwert von 98,

Linking with Uncertainty : The Relationship Between EU ETS Pollution Permits and Kyoto Offsets

Peer reviewedPostprin

Price versus Commitment: Managing the Demand for Off-peak Train Tickets in a Field Experiment

Using data from a field experiment, we provide estimates for the own-price elasticity of train travel in Switzerland. Our estimates are based on exogenous changes to the level of discounts for long-distance trains and thus avoid the usual endogeneity problem between demand-dependent discounts. Besides the price, we also vary the length of the pre-sale period during the experiment, which allows us to recover the relative effectiveness of pricing and timing measures. We compute own-price elasticities of around -0.7. Extending the pre-sale deadline by one hour leads to an increase in the pre-sale of discount tickets by 2.1%, which is equivalent to a price decrease by 3.1%. Reducing the price by 10% causes customers to purchase the discount ticket 7 hours earlier. Our results help design measures for peak-shifting in transport at least societal cost

A Model of West African Millet Prices in Rural Markets

In this article we specify a model of millet prices in the three West African countries of Burkina Faso, Mali, and Niger. Using data obtained from USAID’s Famine Early Warning Systems Network (FEWS NET) we present a unique regional cereal price forecasting model that takes advantage of the panel nature of our data, and accounts for the flow of millet across markets. Another novel aspect of our analysis is our use of the Normalized Difference Vegetation Index (NDVI) to detect and control for variation in conditions for productivity. The average absolute out-of-sample prediction error for 4-month-ahead millet prices is about 20 %.Millet, cereal, West Africa, price forecasting, remote sensing, NDVI, regional panel data