Verified emissions and stock prices: Is there a link? - An empirical analysis of the European Emission Trading Scheme
Open access
Date
2012-08Type
- Working Paper
ETH Bibliography
yes
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Abstract
This study examines the relation of stock returns and the announcements on verified emissions in the European Emission Trading Scheme (EU ETS). In a first step we employ event study methods to detect possibly abnormal returns on the respective announcement dates using a sample of quoted stock market firms from Austria, Denmark, Germany and the UK. In a second step we link the estimated abnormal returns to firm characteristics based on the EU ETS (such as verified emissions or over-allocation) as well as to financial firm level data in a cross-sectional analysis. Even though the overall cost from the new regulation on the individual firms was minor, we find evidence for the asset value hypothesis, which states that higher verified emissions induce a higher future permit allocation. This suggests that investors did not perceive the EU ETS in its first set-up as an efficient and effective environmental policy instrument. Show more
Permanent link
https://doi.org/10.3929/ethz-a-007350279Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Event study; European emission trading scheme; Regulation; Verified emissions; Emission tradeOrganisational unit
03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)
02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.
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ETH Bibliography
yes
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