Journal
ENERGY POLICY
Volume 69, Issue -, Pages 510-519Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2014.03.007
Keywords
EU ETS; Allowance transactions; Carbon trading; Over-allocation; Event study
Funding
- Energy Delta Gas Research (EDGaR) program
- Northern Netherlands Provinces
- European Fund for Regional Development
- Ministry of Economic Affairs, Agriculture and Innovation
- Province of Groningen
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The aim of this paper is to examine whether shareholders consider the EU Emissions Trading Scheme (EU ETS) as value-relevant for the participating firms. An analysis is conducted of the share prices changes as caused by the first publication of compliance data in April, 2006, which disclosed an over-allocation of emission allowances. Through an event study, it is shown that share prices actually increased as a result of the allowance price drop when firms have a lower carbon-intensity of production and larger allowance holdings. There was no significant value impact from firms' allowance trade activity or from the pass-through of carbon-related production costs (carbon leakage). The conclusion is that the EU ETS does 'bite'. The main impact on the share prices of firms arises from their carbon-intensity of production. The EU ETS is thus valued as a restriction on pollution. (C) 2014 Elsevier Ltd. All rights reserved.
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