January 4, 2011

EU Explores Possibility for Enhanced Oversight for the European Carbon Market

Filed under: climate — inece @ 11:10 pm

On 21 December 2010, the European Commission published a Communication (pdf) on carbon market oversight. This Communication provides a first assessment of the current level of protection of the carbon market from market abuse and similar problems. It concludes that a major part of the carbon market is subject to appropriate oversight, but that more may be needed in the so-called “spot market.”

According to the EU press release,

“The carbon market in Europe has developed well since the launch of the EU Emissions Trading Scheme in January 2005. From a market oversight perspective, it can be concluded that a major part of the carbon market is subject to appropriate market regulation already, namely the trading in derivatives of allowances and other units that can be used for compliance in the EU ETS (currently CERs and ERUs), which largely falls under financial markets regulation. However, the spot trading in emission allowances is currently not regulated at EU level, while a handful of Member States have decided individually to extend rules applicable to trading in financial instruments to such allowances when traded on spot markets established within their jurisdictions. The spot market is relatively limited and represented no more than 20-25% of the total trading volume in the European carbon market in 2009.”

The Commission will convene an internet-based stakeholder consultation during the first half of 2011 to solicit advice on how best to enhance the level of market oversight and ensure the continued integrity of the carbon market.

The Commission will evaluate the costs and benefits of a number of options for enhancing the carbon market oversight framework. These options include:

  • “the inclusion of the European carbon market under financial markets legislation, e.g. by replacing the currently existing spot trade by trade in “spot futures” admitted to trading in regulated markets.”
  • “the option to define EU ETS compliance units as financial instruments will also be explored, with particular focus on the suitability and proportionality of such an approach.”
  • “bringing spot transactions in EU ETS compliance units – as instruments in their own right – under the ambit of rules set out in the Market Abuse Directive and/or the Markets in Financial Instruments Directive as well as any other financial markets legislation necessary for the efficiency and integrity of the carbon market.”

For more information, see the Commission’s Communication on carbon market oversight or visit the “oversight” section of the EU Commission on Climate Action’s website at http://ec.europa.eu/clima/policies/ets/oversight_en.htm.

For more on INECE’s work on integrity and accountability in emissions markets, see http://www.inece.org/climate/.

Advertisements

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.