Trading dynamics and price behaviour in the EU-ETS and voluntary carbon markets

Carbon markets play an increasingly important role in facilitating the transition to a low-carbon economy. Yet, concerns loom over the potential of excessive speculation in undermining the functioning of carbon markets.

I combine futures prices and data from the Commitment of Traders reports to examine the demand for hedging, excessive speculation, and volatility within the EU Emissions Trading System.

Another goal is to investigate the extent to which various factors influence price formation within voluntary carbon markets (VCMs), by analyzing the futures market for voluntary carbon offsets.

I address two research questions, relating to the role of financial actors within regulated carbon markets, and the impact of key events in shaping market outcomes within VCMs:RQ1: Has the use of the emissions futures market been consistent with its intended function of facilitating hedging by compliance actors in the presence of financialisation?RQ2: How have various events related to the VCMs acted as a catalyst for price formation within VCMs?The project brings a deeper understanding of trading dynamics and price behavior within compliance and VCMs that are important for a low-carbon transition, and offers concrete suggestions for improving the functioning of carbon markets to meet climate goals.