From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor Systems
This paper examines the changing role of emissions trading systems (ETSs) within the macro-financial framework of energy markets, emphasizing price dynamics and systemic spillovers. Utilizing monthly data from seven ETS jurisdictions spanning January 2021 to December 2024 (N = 287 observations after...
Saved in:
| Main Authors: | , , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2025-08-01
|
| Series: | Energies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1996-1073/18/15/4125 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1849766070262431744 |
|---|---|
| author | Cristiana Tudor Aura Girlovan Robert Sova Javier Sierra Georgiana Roxana Stancu |
| author_facet | Cristiana Tudor Aura Girlovan Robert Sova Javier Sierra Georgiana Roxana Stancu |
| author_sort | Cristiana Tudor |
| collection | DOAJ |
| description | This paper examines the changing role of emissions trading systems (ETSs) within the macro-financial framework of energy markets, emphasizing price dynamics and systemic spillovers. Utilizing monthly data from seven ETS jurisdictions spanning January 2021 to December 2024 (N = 287 observations after log transformation and first differencing), which includes four auction-based markets (United States, Canada, United Kingdom, South Korea), two secondary markets (China, New Zealand), and a government-set fixed-price scheme (Germany), this research estimates a panel vector autoregression (PVAR) employing a Common Correlated Effects (CCE) model and augments it with machine learning analysis utilizing XGBoost and explainable AI methodologies. The PVAR-CEE reveals numerous unexpected findings related to carbon markets: ETS returns exhibit persistence with an autoregressive coefficient of −0.137 after a four-month lag, while increasing inflation results in rising ETS after the same period. Furthermore, ETSs generate spillover effects in the real economy, as elevated ETSs today forecast a 0.125-point reduction in unemployment one month later and a 0.0173 increase in inflation after two months. Impulse response analysis indicates that exogenous shocks, including Brent oil prices, policy uncertainty, and financial volatility, are swiftly assimilated by ETS pricing, with effects dissipating completely within three to eight months. XGBoost models ascertain that policy uncertainty and Brent oil prices are the most significant predictors of one-month-ahead ETSs, whereas ESG factors are relevant only beyond certain thresholds and in conditions of low policy uncertainty. These findings establish ETS markets as dynamic transmitters of macroeconomic signals, influencing energy management, labor changes, and sustainable finance under carbon pricing frameworks. |
| format | Article |
| id | doaj-art-d1813d60845f47cabc119c2d89388d5c |
| institution | DOAJ |
| issn | 1996-1073 |
| language | English |
| publishDate | 2025-08-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj-art-d1813d60845f47cabc119c2d89388d5c2025-08-20T03:04:42ZengMDPI AGEnergies1996-10732025-08-011815412510.3390/en18154125From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor SystemsCristiana Tudor0Aura Girlovan1Robert Sova2Javier Sierra3Georgiana Roxana Stancu4Department of International Business and Economics, Faculty of International Business and Economics, Bucharest University of Economic Studies, Romana Square 6, 010374 Bucharest, RomaniaDepartment of International Business and Economics, Faculty of International Business and Economics, Bucharest University of Economic Studies, Romana Square 6, 010374 Bucharest, RomaniaDepartment of Management Information Systems, Faculty of Accounting and Management Information Systems, Bucharest University of Economic Studies, Romana Square 6, 010374 Bucharest, RomaniaDepartment of Applied Economics, Multidisciplinary Enterprise Institute (IME), Faculty of Law, University of Salamanca, Paseo Tomas y Valiente, 37008 Salamanca, SpainDepartment of International Business and Economics, Faculty of International Business and Economics, Bucharest University of Economic Studies, Romana Square 6, 010374 Bucharest, RomaniaThis paper examines the changing role of emissions trading systems (ETSs) within the macro-financial framework of energy markets, emphasizing price dynamics and systemic spillovers. Utilizing monthly data from seven ETS jurisdictions spanning January 2021 to December 2024 (N = 287 observations after log transformation and first differencing), which includes four auction-based markets (United States, Canada, United Kingdom, South Korea), two secondary markets (China, New Zealand), and a government-set fixed-price scheme (Germany), this research estimates a panel vector autoregression (PVAR) employing a Common Correlated Effects (CCE) model and augments it with machine learning analysis utilizing XGBoost and explainable AI methodologies. The PVAR-CEE reveals numerous unexpected findings related to carbon markets: ETS returns exhibit persistence with an autoregressive coefficient of −0.137 after a four-month lag, while increasing inflation results in rising ETS after the same period. Furthermore, ETSs generate spillover effects in the real economy, as elevated ETSs today forecast a 0.125-point reduction in unemployment one month later and a 0.0173 increase in inflation after two months. Impulse response analysis indicates that exogenous shocks, including Brent oil prices, policy uncertainty, and financial volatility, are swiftly assimilated by ETS pricing, with effects dissipating completely within three to eight months. XGBoost models ascertain that policy uncertainty and Brent oil prices are the most significant predictors of one-month-ahead ETSs, whereas ESG factors are relevant only beyond certain thresholds and in conditions of low policy uncertainty. These findings establish ETS markets as dynamic transmitters of macroeconomic signals, influencing energy management, labor changes, and sustainable finance under carbon pricing frameworks.https://www.mdpi.com/1996-1073/18/15/4125emissions trading system (ETS)carbon market dynamicscarbon pricing policyenergy price shockspanel vector autoregression (PVAR)explainable artificial intelligence (XAI) |
| spellingShingle | Cristiana Tudor Aura Girlovan Robert Sova Javier Sierra Georgiana Roxana Stancu From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor Systems Energies emissions trading system (ETS) carbon market dynamics carbon pricing policy energy price shocks panel vector autoregression (PVAR) explainable artificial intelligence (XAI) |
| title | From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor Systems |
| title_full | From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor Systems |
| title_fullStr | From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor Systems |
| title_full_unstemmed | From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor Systems |
| title_short | From Policy to Prices: How Carbon Markets Transmit Shocks Across Energy and Labor Systems |
| title_sort | from policy to prices how carbon markets transmit shocks across energy and labor systems |
| topic | emissions trading system (ETS) carbon market dynamics carbon pricing policy energy price shocks panel vector autoregression (PVAR) explainable artificial intelligence (XAI) |
| url | https://www.mdpi.com/1996-1073/18/15/4125 |
| work_keys_str_mv | AT cristianatudor frompolicytopriceshowcarbonmarketstransmitshocksacrossenergyandlaborsystems AT auragirlovan frompolicytopriceshowcarbonmarketstransmitshocksacrossenergyandlaborsystems AT robertsova frompolicytopriceshowcarbonmarketstransmitshocksacrossenergyandlaborsystems AT javiersierra frompolicytopriceshowcarbonmarketstransmitshocksacrossenergyandlaborsystems AT georgianaroxanastancu frompolicytopriceshowcarbonmarketstransmitshocksacrossenergyandlaborsystems |