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.
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.