Global Spillovers of US Climate Policy Risk: Evidence from EU Carbon Emissions Futures

49 Pages Posted: 28 Jul 2022 Last revised: 5 Dec 2022

See all articles by Micah Fields

Micah Fields

Miami University of Ohio - Department of Economics

David Lindequist

Miami University - Department of Economics

Date Written: July 22, 2022

Abstract

International climate policy risk spillovers arise when expected changes to climate policy stringency in one country affect expected climate policy stringency in another country. We develop an event study procedure that allows us to identify such spillovers in emission trading systems. Using our methodology to test for climate policy risk spillovers from the United States (US) to the European Union (EU), we find that financial markets expect EU regulators to follow the direction of US climate policy. Our results highlight the importance of regulatory risk spillovers in the context of global climate policy coordination.

Keywords: EU emission allowances, US climate policy, emissions trading, regulatory risk, political uncertainty, climate policy coordination, dynamic model averaging

JEL Classification: C53, F64, G14, Q58

Suggested Citation

Fields, Micah and Lindequist, David, Global Spillovers of US Climate Policy Risk: Evidence from EU Carbon Emissions Futures (July 22, 2022). Available at SSRN: https://ssrn.com/abstract=4170198 or http://dx.doi.org/10.2139/ssrn.4170198

Micah Fields

Miami University of Ohio - Department of Economics ( email )

208 Laws Hall
Oxford, OH 45056
United States

David Lindequist (Contact Author)

Miami University - Department of Economics ( email )

83 N Patterson Ave
Oxford, OH 45056
United States

HOME PAGE: http:///www.david-lindequist.com/

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