Price Exuberance in the Carbon Emissions Trading Market
5 Pages Posted: 5 Oct 2021
Date Written: June 1, 2021
The pricing of carbon is an essential element in addressing climate change through market activity. Price exuberance can potentially result in a loss of confidence in these markets. We test to see whether the time-series changes from a random walk to an explosive process during the first five months of the European Union’s Emission Trading System Phase IV. Our finding is that the market exhibits market exuberant behavior over this period.
Keywords: Climate change, Pricing, Government Policy, Carbon reduction, Emissions trading, Market Efficiency
JEL Classification: Q30, Q21, Q48
Suggested Citation: Suggested Citation