This book explains the basic methodologies and presents cutting-edge research on the financial aspects of carbon markets. We analyse the economic and financial effects of carbon trading and regulations on the stock market prices of individual companies as well as the joint effects of regulations and of the prices of oil and gas on the prices and volatility of the traded carbon securities. The focus of this book is the European Union Emissions Trading Scheme (EU ETS), which is the most developed carbon trading scheme worldwide. In particular, the book aims to study the informational efficiency of the European carbon market based on the EU ETS. The issue is approached from two different perspectives. The first chapters explore if, and to what extent, new information about the structural and institutional setup of the market impacts the carbon price dynamics. The rest of the book presents a firm-level analysis whether the European carbon market is relevant for the firm valuations of covered companies.The results obtained for the EU ETS can be used as a benchmark for the new carbon markets being developed in North America and worldwide.