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COVID-19 Tests the Market Stability Reserve

Gerlagh, Reyer and Heijmans, Roweno and Einar Rosendahl, Knut (2020). COVID-19 Tests the Market Stability Reserve. Environmental and Resource Economics. 76 :4 , 855-865
[Research article]

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We compare the decrease in energy demand and CO2 emissions in Europe during the financial crisis 2008–2009 with the expected drop in demand and emissions due to COVID-19, and the price response of the EU Emission Trading System (EU ETS). We ask whether the rather limited current price reduction may be due to the Market Stability Reserve (MSR), implemented in the EU ETS between the two crises. Stylized facts and basic theory are complemented with simulations based on a model of the EU ETS. Together, they suggest a mixed result. The MSR stabilizes the EU ETS price in turbulent times, but imperfectly. We show that the more persistent the COVID-19 shock is, the less the MSR is able to serve its purpose.

Authors/Creators:Gerlagh, Reyer and Heijmans, Roweno and Einar Rosendahl, Knut
Title:COVID-19 Tests the Market Stability Reserve
Series Name/Journal:Environmental and Resource Economics
Year of publishing :2020
Page range:855-865
Number of Pages:11
Publication Type:Research article
Article category:Scientific peer reviewed
Version:Published version
Copyright:Creative Commons: Attribution 4.0
Full Text Status:None
Subjects:(A) Swedish standard research categories 2011 > 5 Social Sciences > 502 Economics and Business > Economics
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Type of IDID
ID Code:28566
Deposited By: SLUpub Connector
Deposited On:25 Aug 2022 13:25
Metadata Last Modified:25 Aug 2022 13:31

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