Open Workshop: European Carbon Market Connectedness and Risk Contagion
The aim of the Open Workshop Series in Business and Management Studies is to promote top-quality academic and applied research in various fields of the social sciences. This is a unique opportunity for sharing knowledge and networking with local and international community members.
The EU ETS is one of the central instruments of the EU's decarbonisation efforts, currently covering roughly 40% of the EU greenhouse gas emissions. At its heart is the European Emission Allowance (EUA), a tradable permit granting the right to emit one tonne of CO2. Due to its tradeable nature, and with the adjustments to its scope, understanding the financial characteristics of EUAs and how they interact with broader markets has become increasing important for both market participants and policymakers.
This workshop will discuss some insights from the research on the EUAs and the wider emissions trading markets. One of our research employs Diebold-Yilmaz connectedness framework to analyse the return and volatility dynamics between the European carbon market and a broader set of financial markets post Phase II of the EU ETS. We examine both static and dynamic characteristics of connectedness network, paying particular attention to the role of exogeneous shocks and major regulatory reforms. Another work is extending this to multiple emissions trading markets to ascertain the fragmentation.
We demonstrate in the first research that the return and volatility behavior of EUAs are largely independent of other financial markets, except for coal and gas, and mainly driven by their own fundamental factors. However, we do observe increases in connectedness with broader asset classes during shocks albeit those appear to be short-lived. This idiosyncratic behavior suggests that EUAs can offer meaningful diversification benefits, particularly for non-energy portfolios, with important implications for the design of hedging strategies, sustainable finance investment, and effectiveness of EU climate policy.
The second research is still ongoing and we will discuss some of the approaches we are considering and the initial findings at this workshop.
Speaker: Dr Emre Usenmez, University of Cambridge, U.K.
Dr Emre Usenmez is an Associate Professor at the University of Cambridge and Director of the Master of Studies in Sustainability Leadership course. He is also a Director of Studies for economics at Gonville & Caius College and acts as a PhD adviser at the Institute for Manufacturing, Department of Engineering. He is a Fellow of the Royal Statistical Society where he acts as the Secretary of the Finance and Economics Section, and a Fellow of the Higher Education Academy. His main research interests are in energy, commodities, mining, natural resources, and manufacturing and supply chains.
Prior to joining Cambridge, Emre was a Senior Lecturer in Law and a Senior Lecturer in Finance both at the University of Aberdeen where he also served as a University Dean for Internationalization. He has advised and worked with several national ministries around the world on natural resources and commodities, and written a number of books, chapters, and articles on these topics.
Discussion moderated by Prof. Arnis Sauka.
Attendance is free of charge.
Please sign up for the seminar, by writing to arnis.sauka@sseriga.edu by March 4, 2026.
The aim of the SSE Riga Open Workshop Series is to:
- Foster cooperation between business and management researchers, practitioners and policymakers, as well as
- Promote academic and applied research in various fields of the social sciences, focusing on but not limited to entrepreneurship, marketing, management, public administration, and strategy.
Organised by Professor Arnis Sauka, the Centre for Sustainable Business at SSE Riga