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Conference Agenda

Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).

Please note that all times are shown in the time zone of the conference. The current conference time is: 24th Aug 2026, 01:48:41am WEST

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Daily Overview

Session

Emissions Trading 3
Location: B136
Session Chair: Coline Metta-Versmessen, LEDa, Paris-Dauphine University, PSL University ,Paris

Presentation 2

Carbon price spread and hedging pressure: Theory and evidence from the EU ETS

Marc Baudry^1,2, Simon Quemin^2,3,4, Marie Raude^1,2,5

1: EconomiX, Paris Nanterre University; 2: Climate Economics Chair, Paris Dauphine University; 3: Potsdam Institute for Climate Impact Research PIK; 4: Electricté de France, Research and Development; 5: FSR Climate, European University Institute

Discussant: Eva Franzmeyer (European University Institue)

This paper investigates the persistent positive futures-spot price spread observed in the EU Emissions Trading System. We develop a stochastic allowance market model with heterogeneous, risk-averse regulated firms and a representative non-regulated, financial actor. All agents can trade spot allowances, bank them, and trade futures contracts, but only regulated firms can abate emissions and have compliance obligations. While firm heterogeneity is central for understanding hedging behavior, we show that when regulated firms' aggregate hedging demand is net long, equilibrium futures prices exceed the spot price adjusted for the risk-free interest rate, generating a positive price spread. This prediction is tested empirically using an error correction model estimated on weekly data from 2018-2025, leveraging Commitment of Traders reports to compute a proxy for hedging pressure. This confirms a significant long-run relationship between net hedging demand and the price spread. The paper offers a coherent explanation of futures premia in carbon markets and illustrates how firm heterogeneity and risk-management behavior shape carbon price dynamics.