Asymmetric bootstrap causality test in mean and in variance of spot and future carbon prices

Global warming is caused by the excess amount of high density greenhouse gases in the atmosphere and is considered to be one of the major causes of climate change. As the effect of climate change caused by greenhouse gases on the living beings increase, this issue has started to gain attention from worldwide. The Kyoto Protocol, which has its roots in United Nations Framework Convention on Climate Change, has created alternative solutions to decrease the greenhouse gas emissions with various mechanisms in the field of emissions trading. Named as carbon markets, these markets have had 144 billion Euro market value in the year of 2018. And also over 1300 company has been doing business in this market as of 2018. These markets include the 56% of the global greenhouse gas emission; and understanding how the transactions are made, risks and oppurtunities play an important role in the decision making process of the investors. In this study, transactions of carbon spot and future prices on the European Energy Market and Intercontinental Futures Exchange, causality analysis of changes in median and variance of oil prices and foreign currency exchange, are analyzed with three different econometric tests. We have found that spot and future carbon prices have negative and positive causality relation. In addition causality relation between carbon prices, oil and foreign currency exchange rate have been detected. Related findings have been discussed in comparison with the literature.