EVALUATION OF THE CARBON MARKET IMPACT ON THE POLISH POWER EXCHANGE
Pages: 64-79 Published: 29 May 2015
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Abstract: Significant reduction of CO2 emissions, the increase of energy production from renewable sources and the increase of energy efficiency are the key priorities of EU's energy and climate policy. All these factors have significant impact on the development of the Polish Power Exchange (PPE), what is reflected among others in the electricity prices volatility. Therefore, in this article the behavior of the CO2 emission allowance prices from ECX and ICE Future Europe is examined and compared to the behavior of electricity prices quoted on the PPE. Empirical analysis is connected with the construction of Markov switching models in order to make a comparison between average duration of each variables in high- and low- volatility regimes. These findings allow toevaluate the synchronization of occurrence of higher price risk periods on the carbon market and on the Polish Power Exchange.
Keywords: polish power exchange, co2 emission allowance, electricity prices, markov switching model, environmental management