Epsilon Archive for Student Projects

Abstract

This study examines the potential spillover effects of the EU ETS price trend on agricultural carbon emissions using panel data regression. Despite agriculture's significant contribution to greenhouse gas emissions, it remains excluded from the EU ETS, the primary mechanism for addressing emissions. Despite not being directly covered by the EU Emissions Trading System (ETS), agriculture may experience spillover effects from this policy, affecting emissions, land use, and environmental sustainability. Panel data regression analysis reveals potential spillover effects of ETS prices on agricultural emissions, though with some uncertainty. Robustness tests highlight the influence of GDP on emissions and ETS prices but raise questions about the model's accuracy in capturing spillover effects. Further investigation suggests potential simultaneous or reverse causality bias, emphasizing the need for better data and instrumental variables in future research. Future research should focus on improving data quality, including monthly or quarterly data, and employing instrument variables to mitigate potential confounding variables and causal biases.