Forecasting CER Prices
How should a company go about forecasting prices of Carbon Emission Rights (CERs)? If this was a traditional commodities market, such as coffee or oil, there would be lots of past data one could use, along with experience about the factors likely to influence demand and supply, and hence market prices. For many commodities, seasonal factors are important (e.g. more coffee is drunk in colder months) and their effects are known, as are factors such as trader psychologies (”market sentiment”) and the impact of natural disasters, such as hurricanes.
But Carbon trading is a new market, and there is not much past data to draw on. In addition, no one has much experience or intuition yet about market dynamics, or trader psychology and sentiment. We can speculate (as we do below about the impact of higher wholesale gas prices) but none of us know for certain what the impacts of different events or trends may be on the market prices. Moreover, CER markets are still attracting entrants - not every company which could buy or sell their emission rights has yet made a trade, and we may not see the majority of smaller companies enter the market until nearer (or even after) the time for the first settlement in 2006.
How to forecast prices in these circumstances? Traditional forecasting methods, such as econometric time series methods will not, IMO, be successful. What is needed are novel approaches, which can evolve as the market comes to maturity, and can accommodate very different views of market structure and dynamics. We believe that forecasting models being developed by advanced computer science have potential here, for instance forecasting models based on multi-agent systems.
Carbon360 is currently developing a multi-agent model to aid forecasters of European carbon emissions rights prices. Please do contact us if you want to know more about this.
YourInfoSpot.com said:
Forecasting CER Prices
How should a company go about forecasting prices of carbon emission rights (CERs)? If this was a traditional commodities market, such as coffee or oil, there would be lots of past data one could …
Jos Cozijnsen said:
The CER market IS a commodity market and the fundamentals are demand (how many CERs do governments or companies need?) and supply (how many CERs are offered and when are they deliverable), and whether they play a role in supply and demand too! Only problem, price and volumes are not steady at all.
Governments and political events play role on shortage and the level of agreed price.
Peter said:
Thanks, Jos. I think we are in violent agreement! My main point is that the CER market is still too new, and with too many unknowns, to use traditional forecasting techniques. And we don’t know the impact of market sentiment, since traders themselves are still learning what to think about market events.
tracy said:
where to get the past data of cer price??