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.



The recently published European Commission’s Proposal for a Regulation of the European Parliament and of the Council on insider dealing and market manipulation (market abuse) of 20 October 2011 (COM(2011) 651 final), hereinafter referred to as the “MAD Regulation”, in the Article 6(1) comprises  the legal catalogue of types of information constituting inside information and, under the point (c) contains the following passage:

“(c) in relation to emission allowances or auctioned products based thereon, information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more such instruments, and which, if it were made public, would be likely to have a significant effect on the prices of such instruments or on the prices of related derivative financial instruments”.


In recital 16 in the preamble to the MAD Regulation the intentions giving rise to this important regulatory change are explained in the following way:


“ As a consequence of the classification of emission allowances as financial instruments as part of the review of the Markets in Financial Instruments Directive, those instruments will also come within the scope of this Regulation.


in order to avoid exposing the market to reporting that is not useful and as well as to maintain cost-efficiency of the measure foreseen, it appears necessary to limit the regulatory impact of that duty to only those EU ETS operators, that – by virtue of their size and activity – can reasonably be expected to be able to have a significant effect on the price of emission allowances. ...”.

As a follow-up to the preceding, Article 12(2) of the MAD Regulation regulates the details for the disclosure of inside information obligation in relation to emission allowances and reads:


“2. An emission allowance market participant shall publicly, effectively and in a timely manner disclose inside information concerning emission allowances which it holds in respect of its business, including aviation activities as specified in Annex I of Directive 2003/87/EC or installations within the meaning of Article 3(e) of the same Directive which the participant concerned, or parent undertaking or related undertaking, owns or controls or for which the participant, or its parent undertaking or related undertaking, is responsible for operational matters, either in whole or in part. With regard to installations, such disclosure shall include relevant information to the capacity and utilisation of installations, including planned or unplanned unavailability of such installations.

The first subparagraph shall not apply to an emission allowance market participant where the installations or aviation activities that it owns, controls or is responsible for, in the preceding year have had emissions not exceeding a minimum threshold of carbon dioxide equivalent and, where they carry out combustion activities, have had a rated thermal input not exceeding a minimum threshold.


The Commission shall adopt, by means of a delegated act in accordance with Article 31, measures establishing a minimum threshold of carbon dioxide equivalent and a minimum threshold of rated thermal input for the purposes of application of the exemption provided for in the second subparagraph.”


The four main points are, hence, worth of highlighting:


The assessment on a group basis

An important consideration is that the obligation “to effectively and in a timely manner disclose inside information concerning emission allowances” relates to emission allowances held in respect of business of the emission allowance market participant or parent undertaking or related undertaking.


Bearing in mind the wording of the Commission’s proposal, the said obligation will, hence be assessed taking into account all associated undertakings – and not the separate operators of particular installations.

The legally relevant form of possession of the business


The scope for the legally relevant forms of relation to the said business is depicted in the MAD Regulation very extensively. The associated undertakings will be covered by the new obligations when they “own”, "control” or are responsible for the said business “for operational matters” (tooling agreement for instance?) even only in part.

Especially when only partial control is at issue, the implementation of the new regulatory regime may require new detailed arrangements at the level of the cooperating companies.



The categories of inside information as regards emissions from installations

The MAD Regulation explicitly mentions four categories of inside information with regard to installations:

1) the capacity,

2) the utilisation of installations,

3) planned unavailability of such installations,

4) unplanned unavailability.


Given the wording of these provisions there are grounds to contend that this catalogue isn’t exhaustive.


Parameters for differentiation between the categories of carbon market participants taking into account the criterion for being covered by inside information regime


The parameters which should be the subject of utmost attention of carbon market participants, are the minimum thresholds (to be adopted by the European Commission by means of a delegated act) of:
1) carbon dioxide equivalent for emissions and,

2) rated thermal input.




In case where carbon market participant finds himself above the said threshold, he will face rather burdensome impacts of the new MAD Regulation regime for inside information disclosure. He will have to implement internal arrangements in order to, among others:

1) inform the public as soon as possible of inside information and post on its Internet site inside information to be disclosed publicly - Article 12 (1) of the MAD Regulation,


2) ensure the confidentiality in case of delaying the disclosure of inside information and take appropriate measures in order not to mislead the public - Article 12 (4) of the MAD Regulation,


3) inform the competent authority that the disclosure of inside information was delayed - Article 12 (4) of the MAD Regulation,


4) draw up, regularly update or transmit to the competent authority on request a list of insiders - Article 13 (1) of the MAD Regulation,


5) make public the existence of transactions conducted on own account of a person discharging managerial responsibilities within an emission allowance market participant or a person closely associated with them - Article 14 (1) and (2) of the MAD Regulation.


Pursuant to the IP/11/1217  the MAD Regulation now passes to the European Parliament and the Council for negotiation and adoption. Once adopted the regulation would apply from 24 months after its entry into force.