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695. EU ETS Market Expectations and Rational Bubbles
Invited abstract in session MC-63: Natural Resource Management and Commodity Markets, stream OR in Banking, Finance and Insurance: New Tools for Risk Management.
Monday, 12:30-14:00Room: S14 (building: 101)
Authors (first author is the speaker)
| 1. | Christoph Wegener
|
| Leuphana University Lüneburg |
Abstract
Concerns about a price bubble within the European Union Emissions Trading System (EU ETS) emerged during the third trading period. We argue that bubble tests based on costs for switching from cheap, polluting to costly, clean energy sources is restricted to situations of market certainty. This limitation is unrealistic, considering the ongoing CO2 reduction measures. Additionally, establishing fundamental value through switching costs lacks a singular approach, leading to inconclusive findings. We propose a robust approach to infer bubbles in the EU ETS. Empirical findings do not support the presence of a bubble in the third or fourth trading period.
Keywords
- Analytics and Data Science
- Financial Modelling
- Sustainable Development
Status: accepted
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