Publication

This paper analyzes the determinants of the price for allowances in the European emissions trading scheme (EU-ETS) and asks whether it reacts to fundamental influence factors such as energy prices. It gives background on the EU-ETS, identifies variables considered as determinants of EU allowance prices and gives a qualitative overview over the price movements. Subsequently, it describes the observable variables and the selected data and provides the econometrical analysis. The authors show that as long as the market views the allowances as a scarce input factor, the price reacts to changes in energy prices and weather variations.