Abstract
Climate Change (CC) is a major issue of our century. Controlling the constraints of Greenhouse Gas (GHG) emissions through transformation into opportunities, in an organization to increase industrial production, has become a necessity. The main reason for this adoption was the effectiveness of energy management and responsible linkages that are being developed to determine the issues and opportunities of carbon finance for organizations. Through analysis of the European Union Emissions Trading Scheme (EU ETS) and the Clean Development Mechanism (CDM), this article presents and demonstrates a variety of determinants of CO2 prices (EUA) to be used in econometric techniques. This paper details the main carbon price drivers related to institutional decisions, energy prices, and weather events. Our study focuses on price changes in the EUA, being the most liquid carbon asset. In this regard, we highlighted the daily spot price of the EUA to highlight the daily changes affecting this price, given the high volatility in this Carbon financial market. The treatments of the determinants of CO2 prices (EUA) can be used to analyze the evolving and expanding Carbon financial markets sphere. It features stylized facts about Carbon financial markets from an economics and management perspective, as well as covering key aspects of pricing strategies (institutional decisions, energy prices, and extreme weather events), risk, and portfolio management. Aimed at those with fundamental analysis, the CO2 prices within the framework of the EU ETS depend on several determinants. This paper constitutes an introduction to emission trading and an overview of the regulations governing Carbon financial markets. First, we detail the price changes in the EUA and primary energy prices. Second, we introduce the main characteristics of emissions trading, be it in terms of spatial and temporal limits, Clean Dark Spread, Clean Spark Spread, and Switch Price. Third, we provide a descriptive analysis of atmospheric variables, structural variations, and the Subprime crisis and their impacts on the price development of EU CO2 allowances. Keywords: Fundamental analysis, European Union Emissions Trading Scheme, Clean Development Mechanism (CDM), Determinants of CO2 prices (EUA), Climate risk management.
Highlights
The field of Sustainable Finance through the lens of Responsible Management seems more occupied by the managers than by the economists
A set of approaches and methodologies have been defined in recent years to evaluate the contributions of different sources of greenhouse gas (GHG) emissions, to quantify CO2 emissions and to Progress reports for a Sustainable Development
The European Union Emissions Trading Scheme (EU ETS) to better understand the risks associated with Climate Change (CC) and to identify financial development opportunities related to GHG emissions (Alberola, Chevallier, Cheze, 2008), presenting existing CO2 pricing practices (EUA) By means of the econometric analysis of the two phases of the EU ETS
Summary
The field of Sustainable Finance through the lens of Responsible Management seems more occupied by the managers than by the economists. Faced with this official report, these last two mechanisms are developed to support firms (or countries) to accomplish their discounts allocated by programs CO2, even if there is a space of clarity a lot of use of which is made of these mechanisms as percentage of the complete objective of discount of programs It is worth highlighting the work by Boutti, El Amri and Rodhain (2019), whose drivers a structural model of allowance price under the assumption of the performance of the Carbon Finance Strategy for Sustainable Finance is based on the reaction of the fundamentals of quota prices of the European Union Emissions Trading Scheme (EU ETS). Macroeconomic fundamentals of carbon prices respond to the impact of the subprime crisis during the phase II: 2008-2010
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