Emission possible

Under changes just over a year away, recognised investment exchanges will have to comply with new rules if they want to auction EU emissions allowances. Charlotte Hill and William Maycock report on the Treasury and FSA’s consultations for Phase III of Europe’s greenhouse gas emissions trading system.

Charlotte Hill (charlotte.hill@shlegal.com) is a partner and William Maycock (william.maycock@shlegal.com) an associate in the financial services and regulation team at law firm Stephenson Harwood.

This summer HM Treasury and the FSA have both published consultation papers regarding the auctioning of EU emissions allowances (EUAs) and the changes required to the UK regulatory system to effect this. The two papers are in response to the publication by the EU Commission in the last quarter of 2010 of a regulation setting out the latest rules governing the auctioning of greenhouse gas emissions across EU member states between 2013 and 2020 (the Commission Regulation). From the beginning of 2013, only regulated markets authorised under the Markets in Financial Instruments Directive (MiFID) may auction EUAs. The Treasury’s informal consultation paper sets out the structural amendments necessary to the regulatory framework to enable UK recognised investment exchanges (RIEs) to auction EUAs on behalf of other EU member states, while the FSA’s entirely separate consultation proposes the changes to the FSA Handbook that would be required to accommodate the new UK regulatory structure. RIEs in the UK wishing to carry out auctioning of EUAs therefore need to get a handle on these new rules as quickly as possible and have a number of compliance issues to consider.