Exchange rate effect on carbon credit price via energy markets

Jongmin Yu, Mindy L. Mallory

Research output: Contribution to journalArticlepeer-review


This paper examines the impact of currency exchange rates on the carbon market. We scrutinize this effect through the European Union Emission Trading Scheme (EU-ETS), which primarily uses two substitutable fossil energy inputs for the generation of electricity: coal and natural gas. The European coal market is directly driven by global coal markets that are denominated in USD, whereas, natural gas is mainly imported from Russia and is denominated in Euros. The impulse response functions of a Structural Vector Autoregression (SVAR) model demonstratethat a shock in the Euro/USD exchange rate can be transmitted through the channel of energy substitution between coal and natural gas, and influence on the carbon credit market.

Original languageEnglish (US)
Pages (from-to)145-161
Number of pages17
JournalJournal of International Money and Finance
StatePublished - Oct 2014


  • Carbon market
  • Foreign exchange rate
  • Fuel-switching
  • Structural VAR

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Exchange rate effect on carbon credit price via energy markets'. Together they form a unique fingerprint.

Cite this