Linking does not necessarily mean a merger. Technical compatibility seems far more feasible option. What are the consequences of this limited approach?



'Borrowing' is commonly denoted as the use of compliance instruments from future vintage years for current compliance.

Such an option enhances compliance flexibility, cost-effectiveness and foster carbon price stability. However, borrowing provides an incentive to delay mitigation actions and thereby potentially weakens future targets.



Compliance flexibility can be enhanced by the option of saving credits/allowances to future periods (banking). This option enhances cost-effectiveness and foster carbon price stability. In addition, banking provides incentives for early action, but also involves increasing risks of over-allocation of allowances/credits in subsequent periods.


Analysing emerging emission trading schemes like California and Australia as well as an relatively old one - EU ETS, a general thesis can be posed that banking of allowances between periods becomes now a common rule. Sparse exceptions cover the EU ETS first trading period in the years 2005-2007 and the Australian fixed charge phase which will last till 1 July 2015.



The position limits will be counted in California for each future vintage separately – according to the draft law. Also under the Australian framework the controlling corporation of a group must notify the Clean Energy Regulator if the group has a significant holding of carbon units.



The prohibition against resource shuffling is not currently introduced in EU ETS climate legislation. But for how long?



How many authorisations are necessary to make emissions allowances transfer request fraud-resistant and, concurrently, non-bureaucratic?



All first deliverers of the electricity in the EU must be treated equally, whether they are in-Union generators or electricity importers.




The new framework for central securities depositories (CSD) provides for the rule that without prejudice to the corporate law under which the securities are constituted, an issuer will have the right to arrange for its securities to be recorded in any CSD established in any Member State. A CSD conducting business in different jurisdictions is obliged, however, to identify and mitigate the risks arising from any potential conflicts of laws across jurisdictions.




The opinion of the ITRE Committee highlights the fact that physically settled forward products in MiFID II EC proposal are classified as financial instruments. The essence of the recent ITRE proposal is, however, to explicitly exclude products that can be physically settled and that are entered into for commercial purposes and do not display the characteristics of other derivative financial instruments.



It appears that the regulatory work has stopped half way. Since the critical determination whether a trade has been performed in good faith would still be done in accordance with national laws it could be presumed that problems with enforcement of property rights will persist.



It could presumably contribute to strengthening the liquidity in the emission allowances market and prop-up ailing prices if the safeguards provided for in the Financial Collateral Directive were extended to carbon instruments.

Also emitters could gain advantage from such a legislative action.



May 1, 2012 – overlooking this date means heavy loses for California potential opt-in entities wishing to receive free allocation of 2013-vintage allowances in 2012.


The EUETS covered participants don’t have this problem because in the EUETS opt-in framework does not exist.


Is there a global price for carbon? Today the answer seems obvious - it isn't.
Moreover, throughout the world there are radically divergent approaches to the issue of the very existence of the need for carbon pricing, the concrete price-setting mechanisms not to mention.
In order to outline the issue posed in the title there should be considered in the  first place the regulatory mechanisms for carbon floor and ceilings available in currently deployed schemes in California and Australia as the opposite to the entirely - up to now - market-based system functioning in the EU.

There are arguments that EUAs should be classified as "property" and "intangible property" at common law.


It seems that before the amendment of the Registry Regulation rules as well as after such change the transfer of EUAs in itself may not be regarded as the sufficient proof of ownership of allowances sold. It is notably true when the allowances sold were transferred from an account other than the account of the seller.

A tool for assessing risks inherent in draft Commission Guidelines with respect to aid to undertakings in sectors and subsectors deemed to be exposed to a significant risk of carbon leakage due to EU ETS allowance costs passed on in electricity prices (aid for indirect emission costs).

The important clarification regarding Article 10c of the Directive 2003/87/EC is that the market value of allowances allocated free of charge must not exceed the total costs for investments undertaken by the recipient of free allowances (at the level of company groups). If the total investment costs are lower than the market value of the allowances, the recipients of free allowances will be obliged to transfer the difference to a mechanism that will finance other investments eligible under the National Investment Plan.
The issue of State aid regime could be decisive for potential free allocations and consequently highly influential with respect to market price tendencies for emission allowances.


New provisions of the registry regulation entered at last into force. They significantly reduce the risk of questioning the legal title to emission allowances transferred into the buyer account.


This protection was so far considerably weaker and the Union legal framework did not protect these transactions to the sufficient extent, which was reflected in legal problems originated in thefts of allowances from registries, which, in turn, subsequently shrank the liquidity of the EU ETS spot market.


The Regulation on the Union Registry (which also amended the provisions on registry rules applying already in the second trading period) will in that regard play a fundamental role with respect to the trading in emission allowances.



Recent communication from the European Commission contains invaluable directions for project developers, emission credits investors and, last but not least, installation’s operators.