In this research, the impact of the European Emission Trading Scheme (EU ETS) on the corporate value of European electricity corporations has been measured, and a comparison study of the impact between phase I and phase II of the EU ETS has been performed. To achieve this, a modified multifactor market model has been used to investigate how the development of EU emission allowance (EUA) prices has influenced corporate value. The results indicate that the impact of these has changed much from phase I to phase II. EUA price developments have affected corporate value in opposite directions: in phase I, the increase in EUA prices tended to cause corporate value appreciation, while during phase II, it was more likely to induce depreciation. Second, the corporate value development has been much more sensitive to changes in EUA prices in phase II than in phase I. The causes of the impact change have also been analyzed. The conclusion reached has been that the changes have resulted mainly from the adjustment of the EUA allocation policy between phases I and II. Moreover, the effects of corporate efforts to reduce CO2 emissions on corporate value did not emerge until phase II, when the EUA allocation became more rigorous. (C) 2012 Elsevier Ltd. All rights reserved.