Abstract

The paper deals with the analysis of informational efficiency of the European emissions trading scheme (EU ETS) with the goal of stating whether or not the system has been able to achieve its proclaimed cost-efficiency within the first two trading periods. The efficient market hypothesis suggests that profiting from predicting price behaviour is difficult as the market price should incorporate all available information at any time. I analyse the EU emission market to see if it shows evidence of the weak form of informational efficiency. In order to analyse the weak form of informational efficiency assessments I analyse random walk properties such as, the unit root, autocorrelation and variance ratio tests. The results reveal the existence of informational efficiency only in the second trading period.