Regime-dependent Assessment of Risk Concerning the International Aviation Inclusion Into the EU ETS
DOI:
https://doi.org/10.12775/DEM.2017.008Keywords
European Union Aviation Allowances, EU Emission Trading Scheme, Markov-switching model, riskAbstract
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 assessments 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.
References
Ang, A., Bekaert, G. (2002), Regime Switches in Interest Rates, Journal of Business and Economic Statistics, 20, 163-182.
Chin, A. T. H., Zhang, P. (2013), Carbon emission allocation methods for aviation sector, Journal of Air Transport Management, 28, 70-76.
Commission Regulation (EU) No 601/2012 of 21 June 2012 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council, http://eur-lex.europa.eu/eli/reg/2012/601/oj (12.09.2017).
Decision No 377/2013/EU of the European Parliament and of the Council of 24 April 2013 derogating temporarily from Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, http://eur-lex.europa.eu/eli/dec/2013/377(1)/oj (12.09.2017).
Directive 2008/101/EC of the European Parliament and of the Council of 19 November 2008 amending Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community, http://eur-lex.europa.eu/eli/dir/2008/101/oj (12.09.2017).
Doornik, J.A. (2013), Econometric Analysis with Markov Switching Models. PCGiveTM14, vol. 4, Timberlake Consultants Ltd., London.
Dyduch, J. (2013), Handel uprawnieniami do emisji zanieczyszczeń powietrza (Trading of air pollution emission allowances), PWE, Warszawa.
Hamilton, J.D. (1990), Analysis of Time Series subject to Changes in Regime, Journal of Econometrics, 45, 39-70.
Jajuga, K. (eds.) (2007), Zarządzanie ryzykiem (Risk Management), PWN, Warszawa.
Ko, Y.D., Jang, Y.J., Kim, D.Y. (2017), Strategic airline operation considering the carbon constrained air transport industry, Journal of Air Transport Management, 62, 1-9.
Lawrence, C.T., Tits, A. L. (2001), A computationally efficient feasible sequential quadratic programming algorithm, SIAM Journal of Optimization, 11, 1092-1118.
Liu, J., Chen, Z. (2014), Regime-dependent robust risk measures with application in portfolio selection, Procedia Computer Science, 31, 344 – 350.
Meleo, L., Nava, C. R., Pozzi, C. (2016), Aviation and the costs of the European Emission Trading Scheme: The case of Italy, Energy Policy, 88, 138-147.
Psaradakis, Z., Sola, M. (1998), Finite-sample properties of the maximum likelihood estimator in autoregressive models with Markov switching, Journal of Econometrics, 86, 369 – 386.
Regulation (EU) No 421/2014 of the European Parliament and of the Council of 16 April 2014 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in view of the implementation by 2020 of an international agreement applying a single global market-based measure to international aviation emissions, http://eur-lex.europa.eu/eli/reg/2014/421/oj (12.09.2017).
Sanin, M.E., Violante, F., Mansanet-Bataller, M. (2015), Understanding volatility dynamics in the EU-ETS market, Energy Policy, 82, 321-331.
Tłoczyńki, D. (2015), Rola państwa w kształtowaniu konkurencji na polskim rynku transportu lotniczego (The Role of State in Shaping the Competition in the Polish Air Transport Market), Research Papers of Wrocław University of Economics, 401, 525-534.
Trzpiot, G. (eds.) (2010), Wielowymiarowe metody statystyczne w analizie ryzyka in-westycyjnego (Multidimensional statistical methods in investment risk analysis), PWE, Warszawa.
Stawicki, J. (2004), Wykorzystanie łańcuchów Markowa w analizie rynku kapitałowego (The use of Markov chains in the analysis of the capital market), Wydawnictwo UMK, To-ruń.
Downloads
Published
How to Cite
Issue
Section
License
The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).
To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.
Stats
Number of views and downloads: 461
Number of citations: 0
