No proof so far of abuse in EU carbon market, says watchdog (updated)

European Energy Exchange AG

18/11/2021 18:32

(Recasts first sentence with recent price surge, adds details)
    By Huw Jones
    LONDON, Nov 18 (Reuters) - A preliminary investigation has
found no proof that the European Union's carbon emissions market
was being abused as prices surged to record highs over the past
year, the bloc's securities watchdog said on Thursday. 
    The European Securities and Markets Authority was asked by
the EU's executive, the European Commission, to study the
Emissions Trading System (ETS) after accusations that hedge
funds were speculating in a market that accounted for 8.1
billion tonnes or 90% of global carbon market value in 2020.
    "The growing number of market participants appears in line
with the observed expansion of the EU ETS market," ESMA said in
its report, referring to the European trading scheme.
    "The increase in the number of market participants by itself
cannot be taken as proof for any patterns of disorderly trading
or abusive behaviour present in the carbon market. ESMA will
nonetheless further analyse these trends in its next report."
    A combination of faster than expected reduction in emission
allowances and increased demand was behind the sharp increases
in allowance prices, ESMA said. The price rise was comparable to
that of coal and crude oil, it said.
   
 
    ETS is a cornerstone of the bloc's policy to become
carbon-neutral by 2050, operating as a cap-and-trade system to
reduce greenhouse gases by forcing emitters to pay for each
tonne of carbon dioxide they generate.
    The market is traded on three exchanges: ICE Endex  ICE.N 
in the Netherlands, EEX  DB1Gn.DE  in Germany and Nasdaq Oslo
 NDAQ.O  in Norway.
    The bloc is negotiating new green policies, including
launching a second EU carbon market for the buildings and
transport sector to help cut planet-warming emissions faster.
    Debate around carbon pricing has intensified, with European
Commission President Ursula von der Leyen telling the United
Nations COP26 climate summit https://www.reuters.com/business/cop/was-glasgow-pact-win-climate-time-will-tell-2021-11-14
 this month that a robust framework of rules was needed to make
global carbon markets a reality.
    ESMA said it will produce a further report by early 2022 for
the Commission to assess if certain trading behaviours would
require further regulatory action.
    

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 ESMA ETS Graphic    https://tmsnrt.rs/30BOrYG
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 (Reporting by Huw Jones in London
Editing by Tommy Wilkes and Matthew Lewis)
 ((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters
Messaging: huw.jones.thomsonreuters.com@reuters.net))