The determinants of the EU emission trading. a firm-level analysis

This study explores the trading dynamics of CO₂-emitting firms operating within the EU ETS framework. Spanning from 2005 to 2021, the chapter investigates the factors influencing Italian firms' involvement in the emission allowance market and the intensity of their trading activities. The authors emphasize transaction costs and net position as key factors shaping the trading behavior of Italian firms across all phases of the EU ETS. Moreover, they highlight the significant impact of a firm's ability to effectively reduce emissions on its likelihood of participating in the market. Notably, distinctions in the importance of transaction costs and net allocation position between intrafirm and interfirm trading behavior are also discussed.