Cost of Carry Amount - IETA Provision

IETA Emissions Trading Master Agreement A Jolly Contrarian owner’s manual™ Cost of Carry Amount in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. Cost of Carry Amount in all its glory “Cost of Carry Amount” means the amount calculated by applying the Cost of Carry Rate for the Cost of Carry Calculation Period to the Allowance Price multiplied by the number of Period Traded Allowances Transferred, divided by 360. edit Comparison See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs Resources and Navigation Emissions trading documentation ISDA: EU Anatomy • EU Wikitext • EU Nutshell (premium) • UK Anatomy • UK Wikitext (to be merged into EU Anatomy) IETA: IETA Master Agreement • IETA Wikitext • IETA Nutshell (premium) EFET: EFET Allowances Appendix • EFET Allowances Wikitext • EFET Nutshell (premium) Index: Click ᐅ to expand: ISDA Emissions TOC EUA Annex - Premium Emissions Pro tip: for tons of information about EU ETS and EU financial services regulation see Michał Głowacki’s magnificent emissions-euets.com website. Premium version of this page

Overview

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The definition of Cost of Carry Amount is more or less the same in all three emissions trading documentation regimes. Compare:
ISDA: Cost of Carry Amount
IETA: Cost of Carry Amount
EFET: Cost of Carry Amount

Summary

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What is going on here, then?

Should there be a Suspension Event, the person meaning to deliver the Allowances, and receive cash payment on date X cannot, and will therefore start to get anxious emails from her treasury department. Remember, at this point she wants cash, has (Q.E.D.) no interest in the Allowances, and through no fault of her own is out of pocket.

Therefore the Seller agrees to pay her a Cost of Carry Amount. This is essentially interest at an agreed rate on the Cash Payment that was due, for the duration of the the Suspension Event.

The funny thing is what happens if the Suspension Event has not lifted by the Long Stop Date. Here the transaction is deemed to be irretrievably broken — and, per the consensus of Carbon Squad, the Transaction should therefore be cancelled and just forotten about. Any amounts already paid must be refunded (except where Allowances were delivered against those payments), and everyone walks away and pretends it never happened. This is the “then I woke up and it was all a dream” method of disruption resolution.

This we find utterly extraordinary. Your Cost of Carry Amount accrues ... accrues ... accrues ... and then suddenly in a puff of illogic, on a completely arbitrary Long Stop Date, it just vanishes, along with, presumably, all the rest of the money you stumped up in good faith to finance some other so-and-so’s Allowance obligations. What on earth were they thinking?

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• The JC’s famous Nutshell™ summary of this clause

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See also

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