This paper investigates whether a common factor, which can be interpreted as a shadow carbon price, can be extracted from price series in 13 major national and subnational emission trading systems (ETSs). For this purpose, we estimate a dynamic factor model accounting for information...

This paper aims at extracting a common factor from major carbon pricing. For this purpose, we use a Dynamic Factor Model (DFM) for which the unobserved common factors and idiosyncratic noises are potentially non-stationary processes. The two-step Kalman smoother procedure is used to estimate the...