The aim of this paper is to examine portfolio
management of emission allowances in the US Sulfur Dioxide
Emissions Allowance Trading Program, to determine whether
utilities have a real motive to bank when risk increases. We test a theoretical model linking the motivation of the firm to accumulate permits in order to prepare itself to face a risky situation in the future. Empirical estimation using data for years 2001 to 2004 provides evidence of a relationship between banking behavior and uncertainty the utility is facing with.