Allocations to district heating and high efficiency cogeneration and tariffs - regulatory problems
- Category: Implementation
The free allocations of EUAs to district heating and high efficiency cogeneration in the third trading period will be decreased by way of four different legal measures. The Directive 2009/29/EC thus treats CHP more favorable than electricity generators (which, with exception provided for in Article 10c, receive no free allocation at all) but place them in the much less advantageous position than sectors exposed to “carbon leakage”.
Taking into account that CHP and district heating and cooling in some Member States are obliged to apply prices included in regulated tariffs, it seems natural that national regulators, when approving the said tariffs, should take into consideration the costs of the acquisition of CO2 credits. The detailed extent of the inclusion of these costs into the tariff is yet contentious and, as regards the particulars of the evaluation of that cost, there are many details to be explored.
The regulatory uncertainty in that regard may negatively influence on any investment plans.
Daily Futures Contracts listed on ECX – assessment under MIFID and Regulation No 1287/2006
- Category: Emissions trading
EUA’s and CER’s Daily Futures Contracts traded on ECX are physically deliverable within two trading days - are they spot contracts or financial instruments triggering regulatory framework of MIFID?
The admissibility of changing individual allocations – enforceability and closure rules
- Category: Implementation
To put it briefly - in that regard the diversity isn’t desirable.
EUA/CER spread tendency and the legal framework for CER’s after 2012
- Category: Emissions trading
Despite an extensive variety of provisions relating to the status of CER units in the post-2012 legal framework of the Directive 2009/29/EC (aiming generally at securing stability of the long-term green investments), at least one of these provisions should be of particular concern to the CER buyers and investors.
Recent differentiation in VAT treatment of emissions transactions and the IETA master agreement
- Category: IETA Agreements - Commentary
Taking into account that ETMA’s last version (3.0) was designed in 2008, the question may arise whether the text of the master agreement shows the required elasticity, to cover the multiplicity of approaches taken recently in the matter of VAT taxation of EUAs, CERs and ERUs trading. Let’s remind that they are ranging from exemption from VAT and zero rate, through “reverse charge” to standard rate.
Transfer of allocated EUAs within the same group of companies – the problem persists
- Category: Implementation
It is a common practice that, in the course of restructuring, the groups of undertakings are closing non-effective installations and transfer the production to the most effective ones. Such an objective lies often at the origin of mergers and acquisitions in the capital market.
Taking into account the legal scheme of the EU ETS there are arguments that the abovementioned practice should be reflected in rules relating to installations that entirely or partially ceased to operate or significantly reduced their capacity, on the one hand, and the new entrant reserve on the other. But the aforementioned mutual legal dependencies unfortunately are not included in the text of the Directive 2003/87/EC.
The problem appeared already in the case law. The issue is now – but only as regards the third trading period - in the hands of the European Commission which is obliged by the Directive to adopt by 31 December 2010 legal measures provided for in the Articles 10a(7) and 10a(20) of the Directive.
New primary market for emissions allowances – some remarks on auctioned products
- Category: Auctions of CO2 allowances
In spite of mysteriously drafted provisions of Article (4(2) and 4(3) of the Auctioning Regulation, beneath I try to determine the concrete time span for auctions of futures and forwards in relation to EUAs of the third trading period, as well as the available volumes of such contracts.
Bidding strategies in future auctions of EUAs
- Category: Auctions of CO2 allowances
The rules on the random resolution of “tied bids” and on the application of a uniform clearing price, foreseen in the Commission proposal for the Regulation on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the European Parliament and the Council establishing a scheme for greenhouse gas emission allowances trading within the Community (version of 6 April 2010) will for sure be of utmost attention of the future auction participants.
According to the Impact Assessment, amongst the arguments for the eventual model in that regard was the intention to facilitate access to auction for small and medium-sized enterprises (SMEs).
But the aforementioned principles will take effect in bidding strategies of all bidders.
The Community guidelines on State aid and EUETS after 2013 – changes urgently needed
- Category: Emissions trading
The Community guidelines on State aid for environmental protection, which were adopted in 2008 (OJ C 82, 1.4.2008, p.1. – hereafter the Environmental State Aid Guidelines) are not yet adapted to a climate-energy legislative package, in particular to the Directive 2003/87/EC (as amended by the Directive 2009/29/EC).
Some of the State aid measures foreseen by the Directive 2009/29/EC are not covered by the existing Guidelines and thus the interpretation of these measures on the basis of State aid rules can raise several questions.
VAT taxation of EUAs, CERs and ERUs trading – state of play
- Category: taxation issues
If a company trading in CO2 allowances had a subsidiaries in United Kingdom, France, Netherlands, Romania and Poland, only as regards intra–Community, cross–border transactions all the subsidiaries would have an equal level-playing field.
When we take into consideration allowances traded domestically in each of these countries, each of the aforementioned subsidiaries would have to apply different legal regime. Such a situation hardly can be regarded as an acceptable from a common market point of view.
But the odds are that nothing will change in the near future. The new draft of amendment to the VAT Directive (proposal for a Council Directive amending Directive 2006/112/EC as regards an optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud) provides for the measures, which are only of optional and temporary nature.
The Polish NAP II - is the game definitively ended?
- Category: Legal Alert
As the KASHUE (Polish National Administration for EUETS) announced, submissions relating to the draft of the NAP for the period 2008 - 2012 may be made only by the date 23 March 2010. According to the KASHUE, methodology for allocation of allowances applied in the draft, is analogous to that of 1 July 2008.
The European Commission upheld thus its decision relating to Polish CO2 allocations – despite the court defeat. But taking into consideration the findings of Court of First Instance in he judgment of 23 September 2009 in Case T‑183/07 there is still theoretically possible the opposite move – the increase in amount of allocations.
Since all depends on actual emissions figures – and these must be up-to-date.
Exclusion from tenders for five years as a consequence of the negative verification of energy savings
- Category: Energy efficiency
The draft of a new Polish law on energy efficiency envisages inter alia the framework for the system of “white certificates” that will be issued by the Polish Energy Regulatory Office (URE) and serve as a confirmation of the energy savings as a consequence of energy efficiency improvement measures. But the negative verification of energy savings will be very risky...