We investigate whether liquidity introduces or helps resolve uncertainty in Phase I and the first year of Phase II of the European Carbon futures market. We propose a distinction between ‘absolute' or overall liquidity and that which is ‘relative' to a benchmark. For this purpose, we suggest...

We investigate when market making can be profitable in the European Carbon Futures market, by developing an order type selection rule, based solely on transaction level data. We employ a granular approach that uses an observable variable, i.e. trading intensity, to extract the liquidity and...

This study models the trading intensity in European Allowances (EUA) futures contracts in the European Climate Exchange (ECX) using various specifications and investigates the forecasting ability of observable versus unobservable factors. This set up tests empirically the impact of the evolving...