Annals of Operations Research

, Volume 255, Issue 1–2, pp 157–168 | Cite as

Factors of carbon price volatility in a comparative analysis of the EUA and sCER

Article
First Online:

Abstract

The paper proposes three hypotheses for the factors of carbon price volatility on the basis of the existing literature, and then uses ensemble empirical model decomposition and variance ratio to analyze the carbon price volatility of the European Union emission trading system (EU ETS) and clean development mechanisms (CDM). The results show that carbon price volatility is mainly affected by the market mechanism and external environment. The frequency of the market mechanism is high, with the duration being \(<\)2 months and amplitudes \(<\)1 euro; the external environment has an impact on carbon price at a low frequency, with the duration lasting 5 months or more and amplitudes of more than 2 euros. From the comparison of the two markets, not only in duration, but also in amplitude, the market mechanism and heterogeneity environment are shown to have a more significant impact on EU ETS than on CDM. Compared with its early stages, the carbon market is no longer temperature sensitive. The carbon price has a clear downward trend, with that of the CDM market being the more obvious.

Keywords

European Union emission trading system Clean development mechanisms Ensemble empirical model decomposition  Variance ratio 
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Notes

Acknowledgments

We are grateful for the support of Nagoya University and for the financial support of the National Natural Science Foundation (Grant No. 71273031), Beijing Natural Science Foundation (Grant No. 9152014) and Basic Research Foundation of Beijing Institute of Technology (Grant No. 20132116042). We also would like to thank Dr. Zhenhua Feng and CEEP colleagues for their helpful suggestions and assistance.

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Centre for Energy and Environmental Policy ResearchBeijing Institute of TechnologyBeijingChina
  2. 2.School of Management and Economics, Centre for Energy and Environmental Policy ResearchBeijing Institute of TechnologyBeijingChina
  3. 3.China Shipbuilding Industry Research CenterBeijingChina

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