The takeover of the heat supply – implications for allocations of CO2 allowances
- Category: Implementation
The emissions trading complicates sometimes things the were quite simple so far.
This contention (burdened, some may say, with obviousness) is, however, properly reflected in a practical situation where one heat producer undergoes the significant capacity reduction, or partially or even entirely ceases its operations and the supplies of the heat to the district heating pipelines are taken over by another heat producer which, in turn, must invest in new capacities (which consequently constitutes significant capacity extension in the meaning of the European Commission’s Decision determining transitional Union-wide rules for the harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of 27 April 2011).
Buying allowances in the auctions versus on the secondary market - pros and cons
- Category: Auctions of CO2 allowances
There is little chance for the auctioning system as of 2013 under the current arrangements of the Regulation No 1031/2010 to pose any competition for the secondary market as regards the reliability of supply and the hedging needs. The operators which expect to cover their emissions in the third settlement period only with allowances bought in the auction should in advance be aware of certain legal circumstances that could complicate their projections.
First come, first served – is this the best formula for the allocation of free emission allowances from the 5% reserve?
- Category: Implementation
The free allowances as of 2013 will be allocated on a first come, first served basis – this simple and short assertion produces, however, significant business and legal risks, in particular whether the pool of allowances in the 5% reserve does suffice for all interested in new investments (for instance in high-efficiency cogeneration).
The surrender of allowances initiated in error - the only reversible transaction pursuant to the draft of the Commission Regulation establishing a Union Registry of emission allowances
- Category: Emissions trading
Initiating transactions and processes in the Union emissions registry after the new draft regulation enters into force will require careful consideration because the reversal of potential errors, mistakes and irregularities will be, in principle, legally and technically impossible.
Article 36(5) of the Regulation provides literally that during the 24-hour delay ‘an account representative may propose to the national administrator the cancellation of the transfer on the grounds of a suspicion that the transfer was initiated fraudulently’. Such a wording may create some doubts as regards the issue whether an account representative may propose to the national administrator the cancellation of the transfer on the grounds of a erroneously or mistakenly initiated transfer.
The implications of the European Market Infrastructure Regulation (EMIR) for commodity firms trading on the emissions market
- Category: Emissions trading
As follows from Article 7(4) read in conjunction with Article 7(2) of the EMIR, for the qualification whether an OTC transaction regarding any derivative contract set out in Annex I Section C numbers (4) to (10) of the MiFID (including, consequently, also derivatives for which the underlying asset are emission allowances) entered into by the commodity firm, is subject to the clearing obligation, the decisive significance have two premises:
1) the positive: the breach of the clearing threshold value (to be specified by the European Commission through a delegated act),
2) the negative: the ability of the OTC derivative contracts entered into by a commodity firm to be objectively measured as directly linked to the commercial activity of that counterparty.
The new Australian emission market – will the investors wait till 2015?
- Category: Emissions trading
In the period from 1 July 2012 to 1 July 2015 the new Australian emission market won’t really be a fully-fledged cap-and-trade.
Emissions allowances – are they property rights? Australia and California regulators’ views
- Category: Emissions trading
As was reminded also in the accompanying documents to the MIFiD Directive recent review, the legal classification of emission allowances is not uniform in EU Member States. The said documents observed that some Member States consider emission allowances as property rights, whereas others consider them personal rights.
The nature and characteristics of these allowances (certificate giving the right to emit 1 metric tonne of CO2) could lend themselves to be classified as an intangible asset or a physical commodity. Emission allowances themselves are not classified as financial instruments under MiFID. On the other hand, derivative contracts on these allowances (and other environmental credits) are financial instruments under MiFID under the same criteria as derivatives on commodities.
This interesting theoretical, but burdened also with multiple practical implications, discussion have moved recently into other continents with the spreading of cap-and-trades.
The Proposal for new energy efficiency directive – some questions as regards early actions at the level of enterprises
- Category: Energy efficiency
Entrepreneurs who wish to prepare for the implementation of the new energy efficiency directive and become “early movers” or even to establish potential consequences, in particular, costs for adjustment to the prospective provisions, may face some difficulties.
Beneath a few potential dilemmas of crucial importance.
Banking of CO2 allowances operates onwards not backwards
- Category: Auctions of CO2 allowances
The draft Commission Regulation amending Regulation (EU) No 1031/2010 determines the volumes of greenhouse gas emission allowances to be auctioned prior to 2013. But it should be remembered that EUAs sold in early auctions starting in 2012 will be barred from compliance use in the second trading period.
 Annex I - allowances auctioned prior to 2013 and the auctioned product.pdf | [ ] | 12 kB |
Draft REMIT Regulation does not cover EUAs – but for how long?
- Category: Emissions trading
From the systemic point of view there is no reason, why gas would be treated differently, for the purposes of establishing a coherent regulatory regime for the integrity and transparency of the wholesale energy products, than other fuels for the production of the electricity - like coal, oil and even biomass.
The environmental disclosure obligation under EMAS and confidentiality of commercial or industrial data
- Category: Legal Alert
How to reconcile the two values mentioned in the title above? Does the decision to participate in EMAS mean the waiver of the company’s right to protect confidentiality of the environmental commercial or industrial information? Nothing of the kind. The EMAS Regulation contains a clause on this occasion, proposing indexing information against a baseline year.
| Annex IV to the EMAS Regulation - Environmental Reporting | [ ] | 788 kB |
CO2 emission performance standard – UK goes further than IED Directive
- Category: Emissions trading
On the surge of recent criticism as regards poor performance of the EU ETS as a means of emission reductions, EPS is minded as a regulatory backstop which will limit the emissions from new fossil-fired power stations. It has to be taken into account in any power generation business projections – in the UK for now.