Buy or Sell? Hungarian Carbon Credit Trade: Years of Learning

Abstract

From the beginning, Hungary has played an active role in the trade of state-allocated carbon dioxide emission rights within the EU Emissions Trading Scheme. Our study focuses on carbon dioxide credit turnover of Hungarian firms in the period between 2006 and 2010, seeking to explore the impact of credit prices and accounting classification on trading behaviour of unit trade players in Hungary, in the presence of foreign ownership. Concentrated primarily in foreign-owned Hungarian subsidiaries, the transactions were taken from and tested on the basis of the entity-level database in the official EU Registry. Due to the specificities of the Hungarian carbon dioxide units market, i.e. the extremely high proportion of foreign ownership, the carbon credits behaved as special financial assets. The trade of units reflects not only the influence of the Kyoto Protocol, but the reallocation of these resources from subsidiaries to parent companies as well. The sales and purchases are not closely related to compliance-driven or fundamental demand; rather, main directions are defined by intra-group flows.