Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74196
Authors: 
Bunn, Derek W.
Fezzi, Carlo
Year of Publication: 
2007
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 63.2007
Abstract: 
This paper addresses the economic impact of the EU Emission Trading Scheme for carbon on wholesale electricity and gas prices. Specifically, we analyse the mutual relationships between electricity, gas and carbon prices in the daily spot markets in the United Kingdom. Using a structural co-integrated VAR model, we show how the prices of carbon and gas jointly influence the equilibrium price of electricity. Furthermore, we derive the dynamic pass-trough of carbon into electricity price and the response of electricity and carbon prices to shocks in the gas price.
Subjects: 
Carbon Emission Trading
Energy Markets
Structural VECM
JEL: 
Q48
L94
C32
Document Type: 
Working Paper

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