Evolution of the speculative activity in the European carbon market

We explore the evolution of the speculative activit y in futures carbon markets, by combining volume and open interest data. A comparison of the three phases in the European market is also provided. The evidence provided is consistent with: (i) a high degree of speculative behavior in the moment of listing the contracts for the first t ime, for every Phase; (ii) a higher level of speculation in the first quarter of each year (whic h could be explained by the increase of the number of informed traders in the market during the se months, in relation with the specific schedule of deadlines that characterizes the EU Emi ssion Trading Scheme); (iii) Phase II of the EU ETS seems to be the most speculative phase to date; and (iv) the front contract concentrates the majority of the speculative activity every year .