A Comparison of Reduced-Form Permit Price Models and Their Empirical Performances

Gruell, Georg; Taschini, Luca

Download This Paper

Open PDF in Browser

Add Paper to My Library

A Comparison of Reduced-Form Permit Price Models and Their Empirical Performances

MIT CEEPR Working Paper Series, WP-2009-018

26 Pages Posted: 23 Dec 2009 Last revised: 5 Dec 2010

See all articles by Georg Gruell

Luca Taschini

University of Edinburgh Business School; London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment

Date Written: September 17, 2009

Abstract

Equilibrium models have been proposed in literature with the aim of describing the evolution of the price of emission permits. This paper derives first estimation methods for the calibration of three competing equilibrium models. Second, it demonstrates how their reduced-form versions are inter-related. Third, by means of calibration to historical data, it is shown how these reduced-form models perform in the current price-evolution framework also with respect to standard continuous time stochastic models.

Keywords: CO2 emission allowances, Equilibrium model, Model calibration

JEL Classification: C02, C61, C63, C65, G13

Suggested Citation: Suggested Citation

Gruell, Georg and Taschini, Luca, A Comparison of Reduced-Form Permit Price Models and Their Empirical Performances (September 17, 2009). MIT CEEPR Working Paper Series, WP-2009-018, Available at SSRN: https://ssrn.com/abstract=1527350