Inefficiencies of Carbon Trading Markets
Fuente:
arXiv
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| Autores principales: | , , , |
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| Formato: | Preprint |
| Publicado: |
2024
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| Acceso en línea: | |
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| _version_ | 1866910565907038208 |
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| author | Borri, Nicola Liu, Yukun Tsyvinski, Aleh Wu, Xi |
| author_facet | Borri, Nicola Liu, Yukun Tsyvinski, Aleh Wu, Xi |
| contents | The European Union Emission Trading System is a prominent market-based mechanism to reduce emissions. While the theory is well understood, we are the first to study the whole cap-and-trade mechanism as a financial market. Analyzing the universe of transactions in 2005-2020 (more than one million records of granular transaction data), we show that this market features significant inefficiencies undermining its goals. First, about 40% of firms never trade in a given year. Second, many firms only trade during surrendering months, when compliance is immediate and prices are predictably high. Third, a number of operators engage in speculative trading, exploiting private information. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2408_06497 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Inefficiencies of Carbon Trading Markets Borri, Nicola Liu, Yukun Tsyvinski, Aleh Wu, Xi General Finance The European Union Emission Trading System is a prominent market-based mechanism to reduce emissions. While the theory is well understood, we are the first to study the whole cap-and-trade mechanism as a financial market. Analyzing the universe of transactions in 2005-2020 (more than one million records of granular transaction data), we show that this market features significant inefficiencies undermining its goals. First, about 40% of firms never trade in a given year. Second, many firms only trade during surrendering months, when compliance is immediate and prices are predictably high. Third, a number of operators engage in speculative trading, exploiting private information. |
| title | Inefficiencies of Carbon Trading Markets |
| topic | General Finance |
| url | https://arxiv.org/abs/2408.06497 |