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Module Specifications

Current Academic Year 2012 - 2013
Please note that this information is subject to change.

Module Title Carbon Markets
Module Code EF5111
School DCUBS
Online Module Resources

Module Co-ordinatorSemester 1: Mark Cummins
Semester 2: Mark Cummins
Autumn: Mark Cummins
Module TeacherMark Cummins
NFQ level 9 Credit Rating 5
Pre-requisite None
Co-requisite None
Compatibles None
Incompatibles None
Description
This module will provide students with a comprehensive treatment of the key global carbon markets. Practical insights into carbon trading and risk management activities will be outlined, with particular focus on each of the spot, futures and options markets. Carbon price dynamics, including the key price drivers and best practice modelling techniques will be presented. The module concludes by investigating how well the carbon markets are integrated with the broader energy and commodity markets. The module will afford the opportunity to study the growing academic and industry literature on carbon markets.

Learning Outcomes
1. Distinguish between the European Union Emissions Trading Scheme, Clean Development Mechanism, Joint Implementation and voluntary carbon markets.
2. Understand the role of carbon markets from both trading and risk management perspectives.
3. Understand the mechanics of the carbon spot, futures and options markets and know the prominent global carbon exchanges and OTC markets.
4. Understand the key drivers of carbon prices and appreciate the modelling of carbon price dynamics.
5. Appreciate the link between carbon markets and the broader energy and commodity markets.



Workload Full-time hours per semester
Type Hours Description
Lecture24The lecturer will present the essential ideas and core concepts pointing students towards resources where they can get further information.
Lecturer-supervised learning (contact)12Exercises involving review of practical empirical work.
Independent learning44Preparation for, and reading after lectures.
On-line learning12Moodle: weekly exercises and quizzes
Assignment33Individual project on a topic approved by the Lecturer
Total Workload: 125

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities
Learning activities.
Each topic will be first introduced in a formal lecture setting. Students will be introduced to the growing academic and industry literature on carbon markets. The assignment will provide students the opportunity to research in depth the dynamics of the carbon markets..

Carbon Trading and Risk Management.
Overview of trading and risk management in carbon markets; compliance trading; key carbon credits: European Union Allowances (EUAs), primary and secondary Certified Emissions Reductions (pCERs and sCERs), and Emission Reduction Units (ERUs); main global carbon exchanges; over-the-counter (OTC) carbon markets; trading and risk management in the voluntary carbon markets; carbon market oversight - authority and operationalisation..

Spot, Futures and Options Markets.
Mechanics of spot, futures and options carbon markets; volumes of spot, futures and options transactions; futures and options contract specifications on key global carbon exchanges; Phase I, II and III of EU ETS – effect on spot, futures and options markets; evolution of carbon prices; carbon price volatility; carbon price risk management strategies..

Carbon Price Drivers and Modelling.
Overview of key drivers of carbon prices: policy and regulatory issues, fundamentals of supply and demand, energy markets, macroeconomic effects; statistical features of carbon prices; modelling carbon prices..

Carbon Market Interactions.
Overview of carbon market interactions; investigation of how carbon markets are linked – EUAs and CERs; investigation of statistical relationships between carbon, oil, gas and power markets; investigation of interactions between carbon and equity markets; application of econometric techniques to investigate interactions - regression, cointegration, vector autoregerssion..

Assessment Breakdown
Continuous Assessment50% Examination Weight50%
Course Work Breakdown
TypeDescription% of totalAssessment Date
In Class TestWritten Examination5%Week 3
AssignmentIndividual Project15%Week 4
In Class TestWritten Examination5%Week 7
Group project Group project20%Week 8
In Class TestWritten examination5%Week 10
Reassessment Requirement
Resit arrangements are explained by the following categories;
1 = A resit is available for all components of the module
2 = No resit is available for 100% continuous assessment module
3 = No resit is available for the continuous assessment component
This module is category 1
Indicative Reading List
  • D. Ellerman, F. Convery, C. de Perthuis: 2010, Pricing Carbon: The European Union Emissions Trading Scheme, 1st, Cambridge University Press,
  • B. Hansjürgens, A. Ralf: 2008, Economics and Management of Climate Change: Risks, Mitigation and Adaptation, Springer,
  • S. Labatt, R. R. White: 2007, Carbon Finance: The Financial Implications of Climate Change, Wiley,
  • J. Chevallier: 2011, Econometric Analysis of Carbon Markets: The European Union Emissions Trading Scheme and the Clean Development Mechanism, Springer,
  • J. Hull: 2011, Options, Futures and Other Derivatives, Prentice Hall,
Other Resources
3939, Journal, 0, Energy Economics, 3940, Journal, 0, The Energy Journal, 3941, Journal, 0, The Journal of Energy Markets, 3942, Journal, 0, Energy Policy, 3943, Journal, 0, Ecological Economics,
Array
Programme or List of Programmes
MFCMMSc in Finance
MSEFMSc in Sustainable Energy Finance
Timetable this semester: Timetable for EF5111
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