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Title:Financial intermediaries and emissions trading market development and pricing strategies PDF Logo
Authors:Heindl, Peter
Issue Date:2012
Series/Report no.:ZEW Discussion Papers 12-064
Abstract:This paper examines the role of intermediaries in quantity regulation theoretically and presents a data application to the EU Emissions Trading Scheme (EU ETS). The choice of regulated firms to trade permits through intermediaries or directly at the exchange is discussed. Permit pricing strategies of intermediaries and possible issues of market power of intermediaries are modeled. Based on empirical data, the model application aims to assess the actual costs (fees, fixed costs) from permit trading, which represent costs of transacting. In a competitive setup, costs are relatively modest with about 1% to 2% of the permit price. In the EU ETS, firms that trade more than 283,000t CO2/year are likely to directly access the exchange while others trade with intermediaries. In the unlikely event of an intermediary having market power, overall costs would be six times higher in the model application. Options for regulated firms to access a permit exchange directly at low costs decrease the costs of transacting considerably in a competitive and non-competitive intermediary market.
Subjects:permit trading
financial intermediaries
market power
JEL:Q52
D42
D21
Persistent Identifier of the first edition:urn:nbn:de:bsz:180-madoc-325692
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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