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Regime-dependent Assessment of Risk Concerning the International Aviation Inclusion Into the EU ETS

Aneta Wlodarczyk ()
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Aneta Wlodarczyk: Czestochowa University of Technology

Dynamic Econometric Models, 2017, vol. 17, 129-145

Abstract: In this article the European Union Aviation Allowances (EUAA) price risk, associated with the activity of aircraft operators within the European Economic Area (EEA), has been evaluated across the low and high volatility periods occurring on the carbon permits market. It is found that Markov-switching heteroscedasticity models distinguish well between two volatility regimes, as well as three volatility regimes on the EUAA futures market, and that the assess-ments of EUAA price risk are clearly different in the regimes. These findings may be explained by the European Union Emission Trading Scheme (EU ETS) design and the changes in both the EU climate policy rules and global regulations in the scope of CO2 emissions by international aviation.

Keywords: European Union Aviation Allowances; EU Emission Trading Scheme; Markov-switching model; risk (search for similar items in EconPapers)
JEL-codes: C40 G32 L93 Q53 (search for similar items in EconPapers)
Date: 2017
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