ABSTRACT
Keywords: European Union Allowances (EUAs); Stylised fact; Asset class; Commodity; Commodity prices; Derivatives analysis; Statistics; Time series analysis
JEL Classification: G1
In order to achieve the reduction objectives for greenhouse gas emissions, the European Union decided that a big part of that reduction would have to be directly assumed by the companies of the most polluting sectors. Since 2005, the companies of these sectors, included in the 2003/87/EC Directive, receive each year entitlements to emit one tonne of carbon dioxide equivalent gas, which are denominated European Union Allowances (EUAs).* At the end of the control period, the rms covered by the environmental regulations have to give a sucient number of allowances to cover their veried real emis-
sions. If these companies emit more CO2 than the allowances they own, they would have to go to the European Union Emission Trading Scheme (EU ETS) and buy the dierence. It is important to highlight that not only the polluting companies participate in the EU ETS, but also external agents can trade in it. erefore, knowledge of the statistical properties of EUAs is of interest not only for hedging operations, but also for speculative or risk management purposes.
