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Measuring Carbon Price Volatility and Its Impact on the Effectiveness of the ETS Scheme Professor Nils-Henrik von der Fehr University of Oslo and CERRE Expert Workshop on Carbon Price Volatility Brussels, 14 October 2015 The Textbook Model

SLIDE 1

Measuring Carbon Price Volatility and Its Impact on the Effectiveness

f the ETS Scheme

Professor Nils-Henrik von der Fehr

University of Oslo and CERRE

Expert Workshop on Carbon Price Volatility

Brussels, 14 October 2015

SLIDE 2

The Textbook Model

SLIDE 3

Some Issues

Overall cap
Distribution of quotas
Allocation of allowances
Trade
Prices

SLIDE 4

Prices: the Ten First Years

Source: www.businessspectator.com.au

SLIDE 5

Price Volatility: Measurement

Short-run fluctuations

– price spikes

Long-run variations

– trends

Unpredictability

– underlying causes

SLIDE 6

Price Volatility: Implications

Market participation

– hedging

Abatement

– cost efficiency

Investment

– capital intensive and long-lived assets

Location

SLIDE 7

Price Volatility: Affected Parties

Regulated industries

– directly

Other industries

– indirectly – DSOs & TSOs – other network industries

SLIDE 8

Prof. Nils-Henrik von der Fehr

University of Oslo and CERRE

Centre on Regulation in Europe (CERRE) asbl Rue de l’Industrie, 42 (box 16) B-1040 Brussels Ph: +32 2 230 83 60 Fax: +32 2 230 83 70 bl@cerre.eu www.cerre.eu