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Influences from the European Parliament on EU emissions prices

Deeney, Peter orcid logoORCID: 0000-0002-8112-8692, Cummins, Mark orcid logoORCID: 0000-0002-3539-8843, Dowling, Michael orcid logoORCID: 0000-0002-8093-9039 and Smeaton, Alan F. orcid logoORCID: 0000-0003-1028-8389 (2016) Influences from the European Parliament on EU emissions prices. Energy Policy, 88 (Januar). pp. 561-572. ISSN 0301-4215

The decisions of the European Parliament (EP) are shown to influence both EU emission allowance (EUA) prices and volatility. Reductions in price and increases in volatility are observed when EP decisions are (i) not “party-political” in origin, (ii) made during times of low market sentiment, or (iii) made during times of low market attention. Daily EUA prices from 2007 to 2014 are used in the study, with decisions analysed using an event study approach for price impact, and a GARCH specification for volatility impact. Our findings suggest the need for policymakers to improve communication of long-term strategies for the EUA market. This aims to reduce the evident ongoing uncertainty experienced by traders around each decision made by the EP. The finding that sentiment and market attention at the time of an EP decision influences the market's reaction indicates a need to consider market dynamics in terms of decision timing, so that market turbulence is not an unintended by-product of an EP decision. Indeed some form of medium term forward guidance may be called for.
Item Type:Article (Published)
Uncontrolled Keywords:EU Emission Allowances; Market Sentiment; Market Attention; European Parliament
Subjects:Business > Finance
DCU Faculties and Centres:DCU Faculties and Schools > DCU Business School > DCU Business School Research Paper Series
Official URL:http://dx.doi.org/10.1016/j.enpol.2015.06.026
Copyright Information:© 2016 Elsevier
Use License:This item is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 3.0 License. View License
Funders:DCU O'Hare Scholarship - Peter Deeney, SFI / 12/RC/2289 - Alan F. Smeaton
ID Code:20960
Deposited On:22 Jan 2016 11:02 by Peter Deeney . Last Modified 21 Feb 2022 13:34

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