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...
CCS Directive – government proposals for implementation in Poland
- Category: CCS
According to the proposals that are published at the website of the Polish Ministry of the Environment, the legal framework for the activities relating to carbon capture and storage in Poland will be designed by the amendment of the existing Geologic and Mining Law.
The proposal unfortunately does not reveal particulars relating to the form and extent of the required financial security, which are the matters of utmost attention for the bankers, lawyers and insurers interested in CCS.
EUAs traded on the spot market considered financial instruments (in Romania)
- Category: taxation issues
EU-wide exemption of the supply of emission allowances from VAT while allowing for deduction of related costs is extremely needed for the cohesion of the carbon market.
Banking of EUA’s – is the Directive 2003/87/EC properly implemented?
- Category: Emissions trading
Someone wishing to bank emission allowances from second to third trading period can be surprised by the relevant provisions of some national laws of the Member States.
Take for instance the Articles 28 and 29 of the Polish bill on the GHG and other substances emission allowances trading.
The authorization for brokers dealing in CO2 spot markets?
- Category: Emissions trading
The MIFID Directive does not regulate, in general, the legal requirements for spot markets in CO2 emissions allowances. The legal base for such a view is the Article 38 of the Commission Regulation No 1287/2006 of 10 August 2006 (subject to conditions described in detail in the said provision).
On the other hand, taking into account the economic side of the issue, it is often pointed out, that spot trading of EUA, CER and ERU serves, in principle, commercial purposes (and not the speculative ones).
So, in general, in most cases, the commodities spot markets have different, in relation to markets in financial instruments, national legal schemes.
It applies also to Poland, where the Commodity Exchanges Act of 24 October 2000 sets particular requirements as regards CO2 brokers wishing to trade in spot CO2 markets on the Polish Power Exchange.