It is very likely that the events as regards monetisation of allowances by the EIB will run now quickly. If the legislative process relative to EU ETS registry rules is completed (as declared) in the first half of November 2011, the start of the sale of the first tranche of 20 million allowances could be in December. The consequent 9 monthly tranches of 20 million EUA’s will in that event follow from January 2012 till September 2012.
Furthermore, assuming that, as the EIB indicated, the sale of the remaining 100 million allowances should be completed before 2013 and started immediately after the conclusion of the sale of the first 200 million allowances, it would fall for each month in the last quarter of 2012 approximately 33 million of EUAs for disposal.
On 5 October 2011 the European Investment Bank released new communication on its website (www.eib.org), outlining therein its key intentions relative to procedure for the monetisation of CO2 allowances from NER 300 reserve. The said process is important for the carbon credits market taking into account the volumes of the EUAs concerned and the fragile balance of the demand and supply thereon.
The good example of the short overview of the context of the said process and, additionally, originating from the most relevant source – the institution itself – contains contract notice relating to the negotiated procedure for ‘Carbon exchanges and clearing houses for NER 300 monetisation transactions’ published by the EIB on 27 July 2011 (notice in TED website: http://ted.europa.eu/udl?uri=TED:NOTICE:234820-2011).
The European Investment Bank supports the European Commission as an agent in the implementation of the NER 300 initiative - the world’s largest funding programme for carbon capture and storage demonstration projects and innovative renewable energy technologies. A Cooperation Agreement details the respective roles of the two institutions in implementing the NER 300 Decision, notably, as far as concerns the EIB:
• the appraisal of projects submitted by Member States for funding;
• the monetisation of the 300 million allowances set aside in the New Entrants Reserve of the EU Emissions Trading System for the initiative.
The NER 300 initiative (the "Initiative") is an instrument based on Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowances trading within the Community, as amended. The European Commission has sought assistance from the EIB for the implementation of the Initiative pursuant to Commission Decision 2010/670/EU of 3 November 2010 laying down criteria and measures for the financing of commercial demonstration projects that aim at the environmentally safe capture and geological storage of CO2 as well as demonstration projects of innovative renewable energy technologies. The Bank will act on request of, on behalf of and for the account of the European Commission, subject to an inter-institutional agreement signed between the European Commission and EIB and published in the Official Journal of the European Union under reference 2010/C 358/01 (the "Cooperation Agreement"). The Bank's tasks include the sale of 300 million EUAs. The sales may take place, pursuant to Article 11 of the Cooperation Agreement, on exchange, in privately negotiated (so-called over-the-counter) transactions with one or more counterparties or by means of auctions.
Key decisions of the EIB as regards monetisation process
According to the information released on 5 October 2011 on the EIB website, the EIB acting as an agent for the Commission has decided the main elements of monetisation, namely:
1) all admissible selling channels (i.e. OTC, direct screen trades, OTC exchange-cleared and auctions) are expected to be used,
2) phased approach starting with OTC transactions followed by transactions on selected carbon exchanges in due course,
3) auctions are not dependent on the infrastructure being put in place for early auctions of phase 3 allowances,
4) volumes will be spread as evenly as possible (available trading days will also be considered),
5) settlement date is December 2013.
From the said communication is also apparent that the EIB expects to receive 300 million allowances that are available for settlement following the formal adoption by the European Commission of amended EU ETS registry rules. The legislative process is expected to be completed in the first half of November 2011. This would allow monetisation to start before the end of 2011, depending on the exact date of delivery of the allowances to the EIB.
The EIB declared that it would begin sales of allowances within one month of them being transferred to the Bank and made available for settlement. Monetisation of a first tranche of 200 million allowances must be completed within 10 months after delivery to the EIB. This implies an indicative volume of sales of 20 million allowances per month. Actual monthly volumes of monetisation will be set with a view to minimise any impact on the secondary market. Once sales start, monthly reports on the EIB’s page of overall sales volumes achieved and aggregated prices obtained are envisioned.