Mara Madaleno

Risk premia in CO2 allowances: spot and futures prices in the EEX market

Purpose – This paper seeks to analyze stylized statistical properties of the recent traded asset CO2 emission allowances, for spot and futures returns, examining also the relation linking convenience yield and risk premium, for the German European Energy Exchange (EEX) between October 2005 and October 2009. Design/methodology/approach – The study was conducted through empirical estimations of CO2 allowances risk premium, convenience yield, and their relationships. Findings – Future prices from an ex-post perspective are examined to show evidence for significant negative risk premium, or a positive forward premium. A positive relationship between risk premium and time-to-maturity is found. Both financial concepts are found to be negatively affected by spot price volatility. Convenience yield is positively influenced by CO2 price, while influencing the risk premium positively. Practical implications – From a financial perspective, allowances seem to be producing the desired effects in terms of environmental...

A new LDMI decomposition approach to explain emission development in the EU: individual and set contribution

This study breaks down carbon emissions into six effects within the current 28 European Union (EU) countries group, thereafter, they are divided into two different groups (the first 15 countries (EU-15) and the last 13 entering the EU (EU13)). Country-specific highlights are also examined. It analyses the evolution of the effects using a data span that runs from 1990 to 2014, to determine which of them had more impact on the intensity of emissions, while also breaking down the complete period into two distinct periods (before the Kyoto protocol (1990–2004) and after Kyoto (2005–2014)). In order to add more knowledge to the current literature, both the additive and multiplicative decomposition techniques were used to examine carbon dioxide (CO2) emissions and the selected six components: carbon intensity, fossil fuel consumption, energy intensity, oil imports intensity, oil dependence, and population effect. Results point to different adapting velocities for Kyoto targets and necessary compromises. The different velocities were translated into different positive and negative impacts in the change of behavior of CO2 emissions throughout Europe. A stress in the fluctuations in CO2 variations before and after Kyoto and between the two different groups of EU countries could be noticed. Moreover, energy intensity and per capita dependence of oil products were identified as the major responsible components for the total and negative changes of emissions in recent years. A decrease in total changes of emissions is observed due to the fossil fuel energy consumption effect and total petroleum products effects. It is possible to infer from here that increased renewable capacity is contributing in a positive way to eco-efficiency, and should therefore be accounted for in national policymakers’ decisions in the strongest way possible. Results also seem to indicate that per capita dependence of oil products has decreased, despite oil imports intensity constancy and increased renewable capacity, however, with clear heterogeneous effects, worthy of consideration when defining policies.

Advanced scoring method of eco-efficiency in European cities

This paper analyzes a set of selected German and French cities’ performance in terms of the relative behavior of their eco-efficiencies, computed as the ratio of their gross domestic product (GDP) over their CO2 emissions. For this analysis, eco-efficiency scores of the selected cities are computed using the data envelopment analysis (DEA) technique, taking the eco-efficiencies as outputs, and the inputs being the energy consumption, the population density, the labor productivity, the resource productivity, and the patents per inhabitant. Once DEA results are analyzed, the Malmquist productivity indexes (MPI) are used to assess the time evolution of the technical efficiency, technological efficiency, and productivity of the cities over the window periods 2000 to 2005 and 2005 to 2008. Some of the main conclusions are that (1) most of the analyzed cities seem to have suboptimal scales, being one of the causes of their inefficiency; (2) there is evidence that high GDP over CO2 emissions does not imply high eco-efficiency scores, meaning that DEA like approaches are useful to complement more simplistic ranking procedures, pointing out potential inefficiencies at the input levels; (3) efficiencies performed worse during the period 2000–2005 than during the period 2005–2008, suggesting the possibility of corrective actions taken during or at the end of the first period but impacting only on the second period, probably due to an increasing environmental awareness of policymakers and governors; and (4) MPI analysis shows a positive technological evolution of all cities, according to the general technological evolution of the reference cities, reflecting a generalized convergence of most cities to their technological frontier and therefore an evolution in the right direction.

Commodity Price Interaction: CO2 Allowances, Fuel Sources and Electricity

This work anlyses the relationship between the returns for carbon, electricity and fossil fuel price (coal, oil and natural gas), focusing on the impacts of emissions trading via a Vector Error Autoregressive Correction Model (VECM) for both German and French markets. Results show that the effect of carbon depends on the energy mix of the country under analysis but that it is not the only factor. Less carbon coercion takes place in the European Energy Exchange (EEX) and innovations in carbon are not strongly reflected in electricity prices. Also, market power affects the correct transfer of prices, thus limiting cost increases.

Links between spot and futures allowances: ECX and EEX markets comparison

This paper discusses the relation of spot and futures CO2 allowances, used to model and test forward premium and convenience yield (CY) concepts during 2005-2011. We analyse allowances futures from an ex-post perspective and find positive forward premia for both Phase I and Phase II and for different European markets: European Energy Exchange (EEX) and European Climate Exchange (ECX), indicating the prevalence of contango, for the majority of the futures contracts under analysis. When testing for factors influencing both the forward premium and the convenience yield we see a negative influence of spot CO2 price volatility in EEX, but for ECX results are dubious with respect to the negative influence of volatility over the convenience yield. Results indicate that the convenience yield positively influences the forward premium, while being positively influenced by the spot, being results independent of the volatility forecast used and important for risk management purposes.

Effects decomposition: separation of carbon emissions decoupling and decoupling effort in aggregated EU-15

The ecological burden of economic growth is a highly discussed issue. In this article, we focus on the set of European Union (EU) 15 countries in the period 1995–2014. We first decomposed emissions into six effects and afterward the decoupling-effort index was used to calculate the magnitude of impact that each factor has on it, considering the country group. For the group of the EU-15 in the pre-Kyoto period, CO2 changes are only negative in 1998 and 1999 considering the initial view (with respect to the base year of 1995), being positive for all the other years. This positive effect means increased emissions, for which many contributed the positive and significant effects of income per capita and the population effects. The most significant reductions in CO2 changes are verified in the years after the effective Kyoto commitment and observed mainly in the alternative view (year to year changes), for which many contributed the negative and significant effects of carbon intensity of petroleum products, energy intensity and conversion efficiency in the overall period. The effects elasticity decoupling and decoupling effort do not seem to be controlled by the internal drivers of CO2 emissions. Policy makers should bet in policy instruments pointed in the sense of strengthening energy efficiency, in reducing petroleum products consumption and therefore dependency and on the structure of added value generated by the economy.

Clean energy firms' stock prices, technology, oil prices, and carbon prices

Production costs of alternative energies are still high, but increased demand for oil, future oil supply shortage concerns and climate change concerns, have led to the fast development of renewable energy firms. The sector accomplished has accomplished remarkable progress and attracted attention to clean energy, both at the industry level and at the academic side. With this work we attempt to determine whether or not the placement of a price on carbon emissions encourages investments in clean energy firms. Unlike previous literature we focus on the German case and we address the issue at the individual company level. We were able to verify this link but only for the case of companies whose weight over the amount of total energy produced is relevant, which is the case of solar in Germany.

Resources: Eco-efficiency, Sustainability and Innovation in Tourism

Tourism activities are, by their nature, traditionally resource intensive, particularly in energy, water, soil and raw materials. The efficiency of resource allocation becomes extremely important if sustainable development of these activities is to be pursued. On the other hand, the environmental impact through the generation of waste and pollution of air and water become even more worrying since the environment is itself an input into tourism activities. In this way, this chapter presents the concept of eco-efficiency applied to tourism, that is, the production of goods and services while incurring less impact on the environment and less consumption of natural resources. This chapter has a particular focus on energy, exploring the energy efficiency of tourism activities and the possibility to shift inputs towards renewables. Associated mainly with fossil energy consumption, is the emission of greenhouse gases by tourism activities as transport, accommodation, restaurants and attractions, contribute in this way to air pollution and climate change. This chapter also focuses on ‘eco-innovation in tourism’, as a path to sustainable technologies ensuring eco-efficiency and clean production processes in areas such as construction, integrated water cycles, energy conservation and waste management relating to tourism. The chapter will cover both theoretical perspectives and data analysis, suggesting a number of ways in which public policies, and specifically tourism policy and governance, could be effective in minimizing environmental tourism impacts.

Volatility analysis of returns and risk: Family versus nonfamily firms

Family firms (FF) tend to be classified as less risky and volatile than nonfamily firms (NFF). This article aims to examine whether there are differences in risk and volatility between FF and NFF, using Portuguese listed firms during 2008 and 2017. Through different models and specifications, we were able to verify that there exists a positive relationship identified in the volatility-return nexus which depends on the model used, and even so, negative in the case of FF, but that volatility is stronger in NFF than in FF as descriptive statistics reveal. Furthermore, it was found no considerable differences in terms of the liquidity-volatility relationship between the two types of firms, and we cannot argue that the negative relationship between returns and turnover is higher in NFF. It was also found that more illiquid stocks have negative returns but there are no clear differences between FF and NFF. The crisis effect is more able to explain volatility positively than returns negatively, being the impact lower for NFF. Our results do not strictly confirm the fact that FF are less volatile than NFF but provided variables interaction effects we may argue that a risk-averse investor will be more prone to invest in FF stocks, while a risk lover agent will prefer to look at NFF when building their investment portfolios.

Efficiency in the European agricultural sector: environment and resources

This article intends to compute agriculture technical efficiency scores of 27 European countries during the period 2005–2012, using both data envelopment analysis (DEA) and stochastic frontier analysis (SFA) with a generalized cross-entropy (GCE) approach, for comparison purposes. Afterwards, by using the scores as dependent variable, we apply quantile regressions using a set of possible influencing variables within the agricultural sector able to explain technical efficiency scores. Results allow us to conclude that although DEA and SFA are quite distinguishable methodologies, and despite attained results are different in terms of technical efficiency scores, both are able to identify analogously the worst and better countries. They also suggest that it is important to include resources productivity and subsidies in determining technical efficiency due to its positive and significant exerted influence.