Abstract
We provide evidence of informed trading in the European carbon market. We adapt Easley et al.’s (1996) PIN methodology to the particularities of this market by isolating the trading activity on the two carbon offsets: European Union Allowances (EUAs) and Certified Emission Reductions (CERs). We find that the PIN regularly increases before the publication of the yearly verified-emission reports. CERs exhibit lower average PIN than EUAs. While the PIN of CERs has increased over time, together with its share in total trading activity, EUAs’ PIN has remained pretty stable. Our findings suggest that CERs must not be avoided in any decision or analysis made by researchers, regulators or traders interested in the European carbon market.
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