The University of Southampton
University of Southampton Institutional Repository

Evaluation of European Union carbon and energy networks: evidence from market efficiency

Evaluation of European Union carbon and energy networks: evidence from market efficiency
Evaluation of European Union carbon and energy networks: evidence from market efficiency
This article investigates dynamic networks of the informational efficiency between European Union carbon and energy markets in a quantile-based framework. The market (in)efficiency degree is gauged by capturing the potentially fractional integration order of the market price series using the Feasible Exact Local Whittle estimator on a rolling basis. Rather than relying on a mean-based method, we employ the causality-in-quantiles approach, through which the cross-market linkage of the inefficiency degree is uncovered in a full-distributional characterization. The dynamic linkage is identified through the perspectives of data in return and volatility, respectively. We find that both carbon and energy markets are inefficient, while the inefficiency degree of the former is slightly higher. The inefficiency degree of the two types of markets is featured by asymmetry and non-linearity over the data distribution, while its cross-market linkage is found to be bi-directional. The spillover degree of the dynamic linkage remains the highest at around the median quantile of the “information giver,” while such the degree weakens at the extreme quantiles. Our findings possess insightful implications for effective operations of the emission trading toward a low carbon transition.
European Union emission trading scheme, Market efficiency, causality-in-quantiles, energy market, network
0958-305X
Ren, Xiaohang
970abdf4-ff20-4244-9952-f9ee910736ee
Li, Yiying
fd7136d1-e6c3-4cb9-af0b-4114a321d497
Duan, Kun
054ecbe5-11bf-4e7d-ad5d-b5dcc2ccd786
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Ren, Xiaohang
970abdf4-ff20-4244-9952-f9ee910736ee
Li, Yiying
fd7136d1-e6c3-4cb9-af0b-4114a321d497
Duan, Kun
054ecbe5-11bf-4e7d-ad5d-b5dcc2ccd786
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0

Ren, Xiaohang, Li, Yiying, Duan, Kun and Mishra, Tapas (2023) Evaluation of European Union carbon and energy networks: evidence from market efficiency. Energy & Environment. (doi:10.1177/0958305X231156411).

Record type: Article

Abstract

This article investigates dynamic networks of the informational efficiency between European Union carbon and energy markets in a quantile-based framework. The market (in)efficiency degree is gauged by capturing the potentially fractional integration order of the market price series using the Feasible Exact Local Whittle estimator on a rolling basis. Rather than relying on a mean-based method, we employ the causality-in-quantiles approach, through which the cross-market linkage of the inefficiency degree is uncovered in a full-distributional characterization. The dynamic linkage is identified through the perspectives of data in return and volatility, respectively. We find that both carbon and energy markets are inefficient, while the inefficiency degree of the former is slightly higher. The inefficiency degree of the two types of markets is featured by asymmetry and non-linearity over the data distribution, while its cross-market linkage is found to be bi-directional. The spillover degree of the dynamic linkage remains the highest at around the median quantile of the “information giver,” while such the degree weakens at the extreme quantiles. Our findings possess insightful implications for effective operations of the emission trading toward a low carbon transition.

Text
Energy and Env-Tapas Mishra - Accepted Manuscript
Download (1MB)

More information

Accepted/In Press date: 10 April 2023
e-pub ahead of print date: 16 April 2023
Published date: 16 April 2023
Additional Information: Publisher Copyright: © The Author(s) 2023.
Keywords: European Union emission trading scheme, Market efficiency, causality-in-quantiles, energy market, network

Identifiers

Local EPrints ID: 478791
URI: http://eprints.soton.ac.uk/id/eprint/478791
ISSN: 0958-305X
PURE UUID: 053fe11f-eccc-4d34-9aef-dbad98976039
ORCID for Tapas Mishra: ORCID iD orcid.org/0000-0002-6902-2326

Catalogue record

Date deposited: 10 Jul 2023 16:45
Last modified: 17 Mar 2024 03:36

Export record

Altmetrics

Contributors

Author: Xiaohang Ren
Author: Yiying Li
Author: Kun Duan
Author: Tapas Mishra ORCID iD

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×