Abstract
A sentiment index for the EU emissions market is constructed and is shown to significantly account for phase II and phase III EU emission allowance (EUA) prices after July 2008. This date is found to mark a structural break in EUA behaviour between Oct 2007 to Feb 2014. Before July 2008 only oil and gas prices significantly explain EUA prices, afterwards the Euro Stoxx 50 index, oil, coal, gas and the emissions market sentiment index all explain EUA prices. These results are robust when re-tested with a multiple hypothesis testing regime.
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