This paper provides the first empirical analysis of the determinants of allowance prices on the New Zealand Emissions Trading Scheme (NZ ETS). Our results indicate that imports of offsets rather than fundamentals have been the major price determinant. Moreover, the pricing of New Zealand units (NZUs) can be placed into three distinct periods. In the first period, the system is largely autarkic; in the second period, as international offset prices drop below the NZU price, the system becomes a ‘price taker’; in the final period, following some policy interventions, the system regains some independence. The case of the NZ ETS shows both the power of linking ETSs and the dangers of doing so.
About Daniel Tulloch
Dr. Daniel J. Tulloch is a Research Associate on the Sustainable Finance Programme at the Smith School of Enterprise and the Environment, University of Oxford. His research spans finance, energy policy and econometrics. His research seeks to understand the requirements, challenges and opportunities associated with a reallocation of capital towards investments aligned with global environmental sustainability. He is the chair of sustainable markets for the Research for Action network and coordinates the Stranded Assets Research Network. Daniel holds a PhD in finance from the University of Otago, New Zealand. He also holds an MSc with distinction in International Accounting and Financial Management from the University of East Anglia, Norwich.
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