Environmental & Energy Finance Group

The aim of the EEFG is to promote research in environmental and energy finance. Recognizing the highly interdisciplinary nature of this area, EEFG brings together researchers with expertise in diverse disciplines such as finance, economics, mathematics, computing and environmental sciences.

EEFG context: Evolving energy and environmental markets

The process of liberalisation of the energy sector world-wide, coupled with the use of market based instruments to tackle growing concerns for the environment has seen an explosion of new energy, environmental and commodity markets. These markets range from the Nord Pool, which is a wholesale transnational spot and derivatives electricity market, to environmental markets such as European Union Emissions Trading Scheme (EU-ETS) and green certificate markets such as the ROC (Renewable Obligation Certificates) market in the UK.

These new markets, however, have not been without their problems. Prominent examples among them are the Californian energy crisis of 2000, which resulted in rolling blackouts and calls for the reversal of the liberalisation process, and the EU-ETS market crash in 2006 that raised concerns with regard to the effectiveness of emissions trading, thus posing a serious challenge for European environmental policy. The problems experienced with the new energy and environmental markets have placed the focus on the effective design, regulation and monitoring of these markets. Furthermore, the current banking credit crunch crisis has highlighted risks associated with financial innovation and the need to understand the interdependence between markets in order to mitigate market contagion risk.