An Analysis of Offset Emission Permit Pricing Factors in the Korean Carbon Market
DOI:
https://doi.org/10.31686/ijier.vol10.iss10.3912Keywords:
KOC, KAU, ARDL model, Emission Allowance, Korean Carbon marketAbstract
This study aims to empirically analyze the long-run and short-run equilibrium relationship between the price of Korea Offset Unit (KOC) listed and traded on the Korean Exchange since May 2016, and the variables affecting it, such as Korea Allowance Unit (KAU) price, oil, electricity, economic survey prospect index of the general manufacturing business, heating index and cooling index. In general, research on emission permit prices is conducted on the demand side and the supply side. This study analyzes the relationship in the demand side, and weekly time series data for about 6 years from the end of May 2016 were used with the ARDL model. As a result of the empirical analysis, KOC showed a positive correlation between KAU and oil price, and showed a negative correlation with the prospect of Business Survey Index in the long run. In the short term, KAU, oil price, and electricity price showed a positive correlation, and the prospect of Business Survey Index showed a negative correlation.
Downloads
References
Bae, K. I., Choung, J, H. (2009). A study on the market price of weather risk in pricing weather derivatives, Journal of Derivatives and Quantitative Studies, 17(2). 49–66. DOI: https://doi.org/10.1108/JDQS-02-2009-B0002
Creti, A., Jouvet, P. A., Mignon, V. (2012). Carbon price drivers: phase I versus phase II equilibrium?, Energy Economics, 34(1). 327–334. DOI: https://doi.org/10.1016/j.eneco.2011.11.001
Harris, R., Sollis, R. (2005). Applied Time Series Modeling and Forecasting, John Willey & Sons, Chichester, UK.
Hintermann, B. (2010). Allowance price drivers in the first phase of the EU ETS, Journal of Environmental Economics and Management, 59(1). 43–56. DOI: https://doi.org/10.1016/j.jeem.2009.07.002
IPCC. (2014). Mitigation of Climate Change, Cambridge University Press, Cambridge, UK. 207–282.
IPCC. (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [P.R. Shukla, J. Skea, R. Slade, A. Al Khourdajie, R. van Diemen, D. McCollum, M. Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S. Luz, J. Malley, (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA. doi: 10.1017/9781009157926
Keppler, J. H., Mansanet-Bataller, M. (2010). Causalities between CO2, electricity, and other energy variables during phase I and phase II of the EU ETS, Energy Policy, 38(7). 3329–3341. DOI: https://doi.org/10.1016/j.enpol.2010.02.004
Kim, H. S., Koo, W. W. (2010). Factors affecting the carbon allowance market in the US, Energy Policy, 38(4). 1879–1884. DOI: https://doi.org/10.1016/j.enpol.2009.11.066
Pesaran, M. H., Shin, Y. (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In: Strom, S., Ed., Chapter 11, Econometrics and Economic Theory in the 20th Century the Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge.
Pesaran, M. H., Shin, Y., Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics, 16(3). 289–326. DOI: https://doi.org/10.1002/jae.616
Son, D. H., Jeon, Y. I. (2018). Learning-by-doing effect on price determination system in Korea’s emission trading scheme, Environmental and Resource Economics Review, 27(4). 667–694
Yun, W. C. (2017). The historical decomposition of South Korea"s electricity market prices, Korean Energy Economic Review, 16(1). 35–55.
Downloads
Published
Issue
Section
License
Copyright (c) 2022 Dong Hoon Shin, Dongwook Kim
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyrights for articles published in IJIER journals are retained by the authors, with first publication rights granted to the journal. The journal/publisher is not responsible for subsequent uses of the work. It is the author's responsibility to bring an infringement action if so desired by the author for more visit Copyright & License.
How to Cite
Accepted 2022-08-29
Published 2022-10-01
