Structural breaks in emission allowance prices

We study structural breaks in the emission allowance price process of the European Union Trading System during Phase Π and Phase III, covering years from 2008 to 2016. There is indeed a structural break between the Phase II and Phase III. However, there are several regimes within each of these phases. We find that the high-volatility regimes are usually the regimes with negative average returns, whereas low-volatility regimes usually exhibit zero or positive average returns.