On interaction between carbon spot prices and Czech steel industry

0518938 - ÚTIA 2021 RIV US eng J - Journal Article
Hančlová, J. - Zapletal, F. - Šmíd, Martin
On interaction between carbon spot prices and Czech steel industry.
Carbon Management. Roč. 11, č. 2 (2020), s. 121-137. ISSN 1758-3004. E-ISSN 1758-3012
R&D Projects: GA ČR(CZ) GA16-01298S
Institutional support: RVO:67985556
Keywords : emissions trading * pass-through effect * FAVAR * Granger causality * Impulse Response Function * EUA
OECD category: Industrial relations
Impact factor: 3.182, year: 2020
Method of publishing: Limited access
http://library.utia.cas.cz/separaty/2020/E/smid-0518938.pdf https://www.tandfonline.com/doi/full/10.1080/17583004.2020.1712262

Environmental policy in the European Union is a frequent topic when speaking about a strategic development of national economies, their sectors, or companies. This paper is focused on transmissions between the European carbon market and the Czech steel industry. This relationship is worth exploring for two main reasons – first, iron and steel industry is responsible for a substantial part of CO2 pollution covered by the European Union emissions trading system (EU ETS) and, second, this sector is a traditional and vital industry in the Czech Republic. We use the dynamic Factor Augmented Vector Autoregression (FAVAR) model and Granger causality analysis to identify and assess the interactions between the factors of the EU ETS (prices of emission allowances and grandfathering), and factors of the steel industry like prices and amounts of production. To the best of our knowledge, this is the first application of the FAVAR model to analyse an industrial sector, and it is also the first analysis of the given topic where so many influencing factors are involved (this is allowed by the FAVAR model). The main results show that steel companies in the Czech Republic pass through the emission costs to customers.
Permanent Link: http://hdl.handle.net/11104/0303996