Impacts of regulatory announcements on CO2 prices

The release of information in carbon markets until now has been characterized as being numerous and unscheduled. This paper analyzes the impact of regulatory announcements on carbon prices and their volatility during the period October 2004-May 2007, during which time more than 70 announcements were released. In order to adapt event studies methodology to the particularities of our data, a sole series with lots of announcements, we propose the truncated mean model, which does not take into account big surprises in the estimation period. The results indicate that news has an influence on carbon prices on both the announcement day and on previous days. Additionally, we find no effects of announcements on returns volatility. Both findings suggest a systematic leakage of information to the market for almost all types of events.