Template:M premium EFET Allowance Annex 7

No “abandonment of scheme” in IETA or EFET Emissions docs

Unlike the ISDA Emissions Annex, neither IETA nor EFET Annex provide for “abandonment of scheme” as a contract disruption scenario.

These, we gather are regarded by industry insiders as “an anomaly” — though these are the same Carbon Squad personnel who don’t find anything anomalous about the “then I woke up and it was all a dream” means of resolving ongoing settlement disruptions, suspensions and force majeure — so make of that what you will.

They take great heart from the EU’s “Fit for 55” green transition initiative, which indicates how committed the EU is to its ETS which, after all, has faced down existential and credibility crises before now. So these carbon ninjas loftily opine — and, for the sake of their consultancies, hope and pray— the EU ETS is here to stay and we don’t really need Abandonment of Scheme language anymore ISDA thank you very much so help me.

The JC tends to agree, but on a different basis: an EU ETS Abandonment is really just an event that sends the market value of an emissions allowance to zero. Think of it like an insolvency event for carbon credits. If you treat an abandoned allowance as a zero-value instrument that need not be delivered, but transactions otherwise carry on, then you don’t need the language.