On the efficiency of the European carbon market: New evidence from Phase II

I examine in the period 2008–2011 the efficiency of four carbon dioxide (CO₂) emission allowance futures traded in the Intercontinental Exchange (ICE). To this end, I assess the profitability of trading strategies based on simple technical analysis rules and naïve forecasts. The results from 2010 onwards are consistent with weak market efficiency. In turn, this finding suggests that the European carbon market is gradually attaining a state of maturity. - Highlights: ► I investigate the efficiency of the EU Emissions Trading Scheme (EU ETS) in the period 2008–2011. ► I examine the potential presence of economically significant predictabilities in the prices of four carbon futures. ► The results from 2010 onwards are consistent with weak market efficiency indicating that the European carbon market is gradually attaining a state of maturity