Preparations for California cap-and-trade auctions
- Category: Emissions trading
The objective of the requests for proposals currently released by the Air Resources Board in California is to administer financial and transaction services to support up to six quarterly GHG allowance auctions and up to six “reserve sales” to implement the California cap-and-trade program. ARB is anticipating the first California allowance auction will take place in late 2012. The auctions will continue based on the calendar quarter for the remainder of the program.
The deadline for receipt of proposals is December 2, 2011.
Emission allowances position limits – transatlantic approach common in principle but methods of realisation different
- Category: Emissions trading
The Californian Final Regulation Order belongs to legal measures regulating cap-and-trade schemes that apply the concept of strict ex ante holding limits as regards the volumes of allowances, the entity is eligible to possess.
Section 95920 of the Final Regulation Order defines the holding limit as the maximum number of California GHG allowances that may be held by an entity or jointly held by a group of entities with a direct or indirect corporate association at any point in time.
The said approach is quite unique taking into account the mechanisms of the European Union Emissions Trading Scheme. The review of the oversight measures of the EU ETS is underway effecting these days in adopting by the European Commission the view that emission allowances should be considered financial instrument and all infrastructure of the financial market should generally apply thereto (with some exceptions – see: “MIFID II and emissions – consequences under preliminary investigation”).
Taking into account in this context the newly announced MiFID II and MiFIR Proposals it is apparent that the different regulatory measure has been considered appropriate in that regard i.e. position limits taken, however, on an individual basis and applied ex post.
The issue is quite fundamental when it comes to commercial strategies on the carbon market. It seems that emissions market participants have legitimate interests to be able to be confident in the rules that could have an impact on the possibility to execute previously agreed transactions, and not to be surprised by the sudden regulatory measures introducing, hypothetically, a ban on certain types of transactions or on certain counterparties.
Consequences of the new MAD Regulation regime for inside information for the emission allowances market – the threshold decisive
- Category: Emissions trading
It becomes evident now which participants of the emissions trading infrastructure are systemically important for carbon markets – and these findings will gain the rank of the regulatory text. This pivotal position of only certain installations will not give them any special privileges – but rather burdensome obligations and strict responsibility.
MIFID II and emissions – consequences under preliminary investigation
- Category: Emissions trading
Currently, MiFID does not apply to the secondary trading of spot emission allowances.
What are the pivotal elements of the Commissions proposal on MiFID II as regards emissions? The issue of reclassification of emission allowances as financial instruments was extensively covered by media but is this really the case that capturing spot emissions trading by financial market legal infrastructure effects in entirely win-win situation for everybody? No, it isn’t and the Commission itself admits so in accompanying documents to the MiFID II/MiFIR proposals.
Carry-over of AAUs surplus, LULUCF mechanisms and maket-based instruments - conclusions of the Environment Council of 10 October 2011 for the Durban Conference
- Category: Legal Alert
Bearing in mind the issues of the AAUs carry-over, the LULUCF, offset credits and other flexible mechanisms are currently the “hot topics” and are burdened with far-reaching economical consequences, let’s see what expressions in that regard the environment ministers were able to agree in the official document adopted at the last meeting.
Discrepancies in views on the finality of transfers in emission trading among EU ETS and California cap-and-trade regulators
- Category: Emissions trading
Final Regulation Order, version of October 2011 on California cap on greenhouse gas emissions and market-based compliance mechanisms has been currently posted on the website of the Californian Air Resources Board, together with accompanying documentation, among others, four Compliance Offsets Protocols.
Considering the potential participation in both GHG compliance programs: the European Union Emissions Trading Scheme and its Californian counterpart, it is noteworthy that the registry rules provided for in the Californian scheme are founded on the fundamentally different principle in the practical and legal functioning as regards the finality of transfers.
The schedule and key parameters for the monetisation of CO2 allowances from NER 300 reserve specified by the EIB
- Category: Legal Alert
It is very likely that the events as regards monetisation of allowances by the EIB will run now quickly. If the legislative process relative to EU ETS registry rules is completed (as declared) in the first half of November 2011, the start of the sale of the first tranche of 20 million allowances could be in December. The consequent 9 monthly tranches of 20 million EUA’s will in that event follow from January 2012 till September 2012.
Furthermore, assuming that, as the EIB indicated, the sale of the remaining 100 million allowances should be completed before 2013 and started immediately after the conclusion of the sale of the first 200 million allowances, it would fall for each month in the last quarter of 2012 approximately 33 million of EUAs for disposal.
Divergent opinions on the scope and functions of the transparency regime for the wholesale energy market - the review of the contributions to the recently-closed public consultation
- Category: Legal Alert
According to the revealed contributions to the consultation on the enhanced transparency regime for the wholesale energy markets the German utilities RWE and EnBW share the view that generation and consumption units need to be treated the same.
RWE and EnBW differ, however, in whether the aggregate or unit-by-unit data should be published.
As it seems, it is the EdF that reaches one of the core problems, which is the need that the transparency regime should not require divulging the commercial and hedging strategies of market players, which remain strictly confidential.
Guidance Document n°7 on New Entrants and Closures – important clues on the definition of ‘physical change’ made in the installation in the context of free allocation of carbon credits
- Category: Legal Alert
The long-awaited Guidance Document n°7 issued in September specifies which technical modifications constitute ‘physical change’ in the EU ETS installation and which do not. The additional or reduced allocation of emission allowances valid in the third trading period obviously is at stake.
Analytical study sceptical about the benefits from potential including of fluorinated gases in the European Union Emissions Trading Scheme
- Category: Legal Alert
The European Commission on 26 September 2011 launched a public consultation on strengthening EU measures to reduce emissions of fluorinated gases. Among manifold policy options considered analytical study attached to the consultation’s documents expressed little preference for the general inclusion of hydrofluorocarbons (HFCs), perfluorcarbons (PFCs) and sulphur hexafluoride (SF6) in the EU ETS.
Implications of the European Market Infrastructure Regulation (EMIR) for commodity firms trading on the emissions market - changes by the European Parliament on 5 July 2011
- Category: Legal Alert
The text of the legislative proposal for EMIR, originally proposed of the European Commission on 15 September 2010 (COM(2010) 484 final), being analysed in the post ‘The implications of the European Market Infrastructure Regulation (EMIR) for commodity firms trading on the emissions market’, has been substantially changed by the European Parliament on 5 July 2011 (ordinary legislative procedure: first reading).
The modifications made are far-reaching and in a particular way influence on the position of the commodity firms trading on the emissions market. Beneath a cursory review of the main amendments to the draft EMIR by the European Parliament on 5 July 2011 with focus on those particularly relevant for non-financial counterparties.
Provisions on companies affiliations added to REMIT by the European Parliament on 14 September 2011
- Category: Legal Alert
The European Parliament in the 1st reading extended the obligation to publish inside information on parent undertakings and related undertakings.