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Emissions Trading as a Policy InstrumentEvaluation and Prospects$
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Marc Gronwald and Beat Hintermann

Print publication date: 2015

Print ISBN-13: 9780262029285

Published to MIT Press Scholarship Online: January 2016

DOI: 10.7551/mitpress/9780262029285.001.0001

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Trading Behavior in the EU ETS

Trading Behavior in the EU ETS

Chapter:
(p.213) 9 Trading Behavior in the EU ETS
Source:
Emissions Trading as a Policy Instrument
Author(s):

Ralf Martin

Mirabelle Mûuls

Ulrich J. Wagner

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262029285.003.0009

Based on interviews with 429 manufacturing firms in six European countries, this chapter analyzes the rationality of trading behavior in the EU ETS. The majority of firms does not trade on the EU allowance market although most firms have excess permits which they choose to bank. Similarly, the majority of installations that are part of a larger firm manage compliance within their own installation despite having the option to pool permits within firms. About 30% of firms do not appreciate the market created by the EU ETS; i.e. they do not consider carbon allowances as a financial asset that could provide profit opportunities. In the same vein, some firms do not make their allowances available despite possessing an excess supply: on average firms start to sell only if their excess supply is larger than 5,000 allowances. However, the total number of excess allowances held by firms below the trading threshold is rather small, at less than 10% of all excess allowances.

Keywords:   Trading behavior, Banking, Pooling, permit market, excess supply

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