We examine the role of carbon swap trading and energy prices in price correlations and volatilities in the EU and Kyoto.

We propose a EUA–sCER price correlation model using inverse Box–Cox MAC curves and emission reduction volume processes.

70">The model includes EUA–sCER swap transaction and stronger energy price impacts on EUA prices than sCER prices.

The empirical studies show a positive EUA volume impact on EUA–sCER swaps and a positive energy price impact on EUA prices.

High EUA–sCER price correlations during high EUA price periods stem from EUA–sCER swap transaction.

High EUA–sCER price correlations during the financial turmoil period with low EUA prices come from the drop of energy prices.

The leverage effects observed in security markets exist in both the EUA and sCER markets from the price–volatility relation.