Template:EFET Allowance Annex EEP and EEP Equivalent

“Excess Emissions Penalty” or “EEP” means a financial payment required to be made to a Relevant Authority pursuant to and in accordance with Article 16(4) of the EU ETS Directive (which, for the avoidance of doubt, shall not include any costs relating to or arising from the obligation to purchase and/or surrender Allowances in the following Compliance Year), or its equivalent under any other Emissions Trading Scheme;
“Excess Emissions Penalty Equivalent” or “EEP Equivalent” means an amount which the Buyer must pay to a third party in respect of any amount payable by that third party which arose as a result of the Buyer’s failure to Transfer the required Allowances to that third party and which in turn was a consequence of the Seller’s failure to Transfer the Contract Quantity to the Buyer under this Agreement (which, for the avoidance of doubt, shall not include any costs relating to the obligation to purchase and/or surrender Allowances in the following Compliance Year);

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§ 8.3 Excess Emissions Penalty (“EEP”) and EEP Equivalent:

(a) Applicability. The Parties to any Allowance Transactions desiring to make EEP or EEP Equivalent inapplicable and inoperative to the calculation of the Buyer’s Cover Costs for any Allowance Transactions between them may do so either globally by specifying EEP or EEP Equivalent as not applying in Part II of this Allowances Appendix, or specifically, with respect to a particular Allowance Transaction, by so agreeing in the terms of that Allowance Transaction itself.

(b) Excess Emissions Penalty. If EEP is applicable, the Buyer may invoice the Seller in the amount of an EEP it incurs as the result of the Seller’s failure to Transfer to it Allowances when required pursuant to the terms of an Allowance Transaction.

(c) Excess Emissions Penalty Equivalent. If EEP Equivalent is applicable, the Buyer may invoice the Seller for an EEP Equivalent it incurs as the result of the Seller’s failure to Transfer to it Allowances when required pursuant to the terms of an Allowance Transaction.

(d) Duty to Mitigate. The Seller’s obligation to pay the EEP or the EEP Equivalent is subject always to the Buyer’s overriding obligation to use commercially reasonable endeavours (including, without limitation, making use of any excess Allowances it may have available to it at the time, and/or procuring such Allowances as are available in the market) to satisfy its obligation to surrender the required number of Allowances necessary to avoid or otherwise mitigate its EEP or EEP Equivalent liability. For the avoidance of doubt, the Buyer’s duty to mitigate its EEP or EEP Equivalent exposure is limited to management of its Allowance portfolio and shall not impose upon it any further obligation regarding its operation of any installation with an obligation to surrender Allowances to a Relevant Authority.

(e) Evidence of Commercially Reasonable Efforts. Upon request, the Buyer shall confirm to the Seller:

(i) that it has incurred EEP or EEP Equivalent consequent upon the Seller’s failure to Transfer Allowances to it;

(ii) the extent to which the requirement for the Buyer to pay the EEP or the EEP Equivalent results from the Seller’s failure to make such a Transfer;

(iii) that it was unable to mitigate its EEP or EEP Equivalent exposure,

and shall provide the Seller with evidence: (A) that the EEP or EEP Equivalent, as applicable, was incurred by it; (B) that such EEP or EEP Equivalent was incurred as a result of the Seller’s failure to perform its Transfer obligation; and (C) of its commercially reasonable endeavours to mitigate its exposure to such EEP or EEP Equivalent as it has invoiced to the Seller; provided, however, that should the Seller elect to challenge the Buyer in respect of any of the above matters, then the burden for demonstrating: (A) that such EEP or EEP Equivalent was not actually incurred by the Buyer; (B) that such EEP or EEP Equivalent was not incurred by the Buyer as a result of the Seller’s non-performance; and/or (C) the insufficiency, lack of thoroughness or unreasonableness of such endeavours shall be on the Seller and, if § 22.3 (Expert Determination) is specified as applying in Part II of this Allowances Appendix the process by which such challenge will be determined shall be in accordance with the procedures set forth in § 22.3 (Expert Determination).

(f) Later Mitigation of Recovered EEP or EEP Equivalent. To the extent an initially assessed and recovered EEP is later reduced and/or fully or partly returned or credited to the Buyer by a Relevant Authority for any reason whatsoever, only such reduced and finally assessed EEP shall apply. EEP recovered by the Buyer in the form of damages under this § 8 which are later reduced or returned to such Buyer shall be returned upon demand to the Seller who paid such damages, and the Buyer shall provide the Seller with prompt notification of any such reduction or return. Similarly, in the event the Seller has made the Buyer whole for an EEP Equivalent, and all or any portion of the underlying EEP or EEP Equivalent upon which the Seller’s EEP Equivalent payment was based is later returned to the Buyer by its resale customer, the Buyer shall return an equivalent amount of its own EEP Equivalent payment to the Seller.