The price of European Union Allowances (EUAs) has been declining at far lower levels than expected during Phase I (2005-2007). We advocate low allowance prices may also be explained by banking restrictions between 2007 and 2008 which undermine the ability of the EU ETS to provide an efficient price signal.
Alberola, E. and J. Chevallier (2007). "European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007)." EconomiX Working Paper No. 2007-32, Oct 2007.