Abstract:

By collecting, processing and combining the Community Independent Transaction Log (CITL) data, the market micro structure of the trial phase European Union Emission Trading Scheme (EU ETS) was built. On this basis, the market setup, the trading behaviour of emitting companies, and the evolution of the market demand supply situation of the EU ETS were conducted. From a general perspective, the main motivation of emitting companies’trading behaviour was for compliance. Consequently, their trading behaviour was found inactive, seasonal and inclined to resort only one type of behavior either buying or selling. The companies who had massive amounts of allowances therefore dominated the allowances trading by using their advantages of allowance stock, financial condition and information asymmetry. This paper also regarding the impacts of the participation of the financial companies, it was observed that the oversupply situation was eased when the allowances were absorbed by financial companies in the initial two years and became deteriorated, when the allowances were flowed out of them in the last year. Under the background of China preparing its unified national ETS, analyzing the trading behaviour of market participants and the potential risk of their behaviour can provide several enlightenments to design market mechanism.

Key words: emission trading, transaction log, micro trading behaviour, emitting companies, financial companies