Understanding the Link Between Aggregated Industrial Production and the Carbon Price - Green Energy and Efficiency: An Economic Perspective - page 127

0 500 1000 1500 2000

0 5 10 15 20 25 30

5 10 15 20

Fig. 4 Residuals autocorrelation for EUAs and EU industrial production

macroeconomic variables. Except for some possible outliers, the plot shows no
particular pattern (as the standardized residuals are scattered around zero). The
middle panel is the Auto-Correlation Function (ACF) plot of the standardized
residuals. The con

p rule, and should be

dence band is based on the simple 1.96 /

regarded as a rough guide on the signi cance of the residual ACF. No lags in

the residual autocorrelation are found to be signi cant. The bottom panel reports the

p -values of the more rigorous portmanteau test. The p -values are found to be very
large for all m .Asno p -value is found to be signi cant (i.e., we do not reject the

null hypothesis of no autocorrelation in the residuals), we may infer that the TVAR
model is well-speci

ed.

6 Conclusion

This chapter is dedicated to the analysis of the adjustment between the carbon
futures price

— taken from the European Climate Exchange — and macroeconomic

activity proxied by the Eurostat EU 27 Industrial Production index. Despite being

among the chief carbon price drivers (if not the central), economic activity is indeed
often forgotten in empirical studies, which omit it in favor of equity variables (e.g.,
the Eurostoxx 50 index).
Two main approaches seem to coexist in the literature so far: (i) the

—

“ nancial

markets approach. Some scholars

have attempted to build mixed equity-macroeconomy strategies. Our central con-
tribution is to recall that, besides energy and institutional variables, there exists a

” approach, and (ii) the “ macroeconomic activity ”