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Source: Journal Citation ReportsTM from ClarivateTM 2022

Entrepreneurship and Sustainability Issues Open access
Journal Impact FactorTM (2022) 1.7
Journal Citation IndicatorTM (2022) 0.42
Received: 2020-02-10  |  Accepted: 2020-06-10  |  Published: 2020-09-30

Title

Short-term European Union Allowance price forecasting with artificial neural networks


Abstract

The European Union Emissions Trading Scheme (EU ETS) was created to reduce greenhouse gas emissions. Companies producing carbon emissions have to manage associated cash flows by buying or selling carbon allowances. Moreover, future carbon prices could affect company decision making on decarbonization technology investments. In this paper, we forecasted short-term future carbon allowance prices using an artificial intelligence tool: a neural network. The resulting mean error was 1.7617 %. This is indicative of very good performance for a time series whose evolution is influenced by subjective economic and political decisions. The inclusion in the forecasting model of variables possibly directly related to the evolution of the price of CO2 emission allowances did not improve prediction accuracy. Therefore, we can assume that emission allowances evolve following a random path. The neural network provided reliable predictions which agents selling or buying allowances can use to make their decisions.


Keywords

European Union Allowances (EUA), carbon allowance price, neural networks, time series forecasting


JEL classifications

Q50 , Q52 , C45


URI

http://jssidoi.org/jesi/article/618


DOI


Pages

261-275


Funding

This research was funded by Junta de Extremadura (Extremadura Regional Government) Research Group Support Program Grant GR18075 (co-financed by European Union FEDER funds)

This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

García, Agustín
University of Extremadura, Badajoz, Spain https://www.unex.es
Tufts University, Medford, Massachusetts, United States https://www.tufts.edu
Articles by this author in: CrossRef |  Google Scholar

Jaramillo-Morán, Miguel A.
University of Extremadura, Badajoz, Spain https://www.unex.es
Articles by this author in: CrossRef |  Google Scholar

Journal title

Entrepreneurship and Sustainability Issues

Volume

8


Number

1


Issue date

September 2020


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

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References