Work detail

Power markets and the EU ETS: How volatility propagates across Central Europe?

Author: Mgr. Vojtěch Jurka
Year: 2021 - winter
Leaders: doc. PhDr. Jozef Baruník Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 97
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/221188/
Abstract: The thesis deals with connectedness in the uncertainty of the carbon and power markets in Central
Europe. While the drivers of power price were extensively documented in the literature, we
investigate how uncertainty propagates between the German power market and its production
factors using a recently developed framework of connectedness measurement. The connections in
uncertainty on markets are insightful for the decision of the agents that require a premium for
undertaking risk. The empirical results suggest that connectedness in uncertainty significantly varies
over the studied period. The interdependence of power with coal decreases while the spillovers
between gas and power rise on importance reflecting the changes in generation mix of Germany. For
most of the period, the volatility of carbon and power markets is highly correlated. However, the
share of volatility transmission spikes several times during the period of 2016-2019. In reaction to the
reform of the EU Emission Trading Scheme, the uncertainty about emission allowance prices
propagates to the German power market, increasing the uncertainty about power prices on the long
horizon.

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