Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278199 
Year of Publication: 
2022
Series/Report no.: 
WWZ Working Paper No. 2022/07
Publisher: 
University of Basel, Center of Business and Economics (WWZ), Basel
Abstract: 
We examine the pattern of allowance trades in the European Union Emissions Trading System (EU ETS) using highly disaggregated trading data and identify a significant and robust home market bias. Our results point to informational transactions costs that increase when trading across national borders. The existing trade pattern in goods and services explains two thirds of the home bias, with the remainder due to other causes. Our finding suggests that firms make use of existing trade networks to overcome search costs in bilateral allowance trade. Since the home bias differs across firms, it follows that marginal abatement costs are not equalized across market participants of the EU ETS.
Subjects: 
Emission permit market
EU ETS
transactions costs
gravity model
home bias
JEL: 
F14
F18
Q52
Q54
Q58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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