Carbon Pricing in New Zealand's Emissions Trading Scheme

39 Pages Posted: 7 Apr 2016

See all articles by Ivan Diaz-Rainey

Ivan Diaz-Rainey

Department of Accounting, Finance and Economics, Griffith Business School, Griffith University; University of Otago

Daniel J. Tulloch

University of Oxford - Smith School of Enterprise and the Environment

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2016

Abstract

The New Zealand Emissions Trading Scheme (NZ ETS) is an intensity-based system and the second oldest national ETS. It is unique in that it is highly international (with unlimited use of Kyoto allowances) and it incorporates forestry. We provide the first empirical analysis of the determinants of allowance prices on the NZ ETS. Our results indicate that imports of offsets rather than fundamentals have been the major price determinant. Moreover, the pricing of New Zealand units (NZUs) can be placed into three distinct periods, delineated by two structural breaks. In the first period, the system is largely autarkic; in the second period, as international offset prices drop below the NZU price, the system becomes a ‘price taker’; in the final period, following some policy interventions, the system regains some independence. The case of the NZ ETS shows both the power of linking ETSs and the dangers of doing so.

Keywords: Asset Pricing, Carbon Finance, Carbon Markets, Emissions permit markets, Emissions trading, New Zealand, NZ ETS

JEL Classification: G12, G14, Q52, Q53, Q54, Q58

Suggested Citation

Diaz-Rainey, Ivan and Tulloch, Daniel James, Carbon Pricing in New Zealand's Emissions Trading Scheme (April 5, 2016). Available at SSRN: https://ssrn.com/abstract=2759284 or http://dx.doi.org/10.2139/ssrn.2759284

Ivan Diaz-Rainey (Contact Author)

Department of Accounting, Finance and Economics, Griffith Business School, Griffith University ( email )

Australia

University of Otago ( email )

Dunedin
New Zealand

Daniel James Tulloch

University of Oxford - Smith School of Enterprise and the Environment ( email )

United Kingdom
1865614934 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
176
Abstract Views
2,647
Rank
168,274
PlumX Metrics