Delivering Party’s Replacement Cost - Emissions Annex Provision

EU Emissions Allowance Transaction Annex to the 2005 ISDA Commodity Definitions A Jolly Contrarian owner’s manual™ Resources and navigation 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. 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) Section Delivering Party’s Replacement Cost in a Nutshell™ Use at your own risk, campers! Delivering Party’s Replacement Cost means for Receiving Party’s failure to accept delivery of a number of Allowances (the “DPRC Shortfall”) the following amount: (AP + Cost of Carry - EUAspot x DPRC Shortfall) + Default Interest Where: “AP” = relevant Allowance Purchase Price/Allowance Strike Price “Cost of Carry” = Where the parties’ “Physical Settlement” obligations are terminated following a Suspension Event, the Close-out Cost of Carry Amount. “EUAspot” = the price per Allowance the Calculation Agent determines Delivering Party, would reasonably receive in an arm’s length spot transaction on the Final Compliance Date for the same number of equivalent Allowances to be delivered on the later of the Final Compliance Date and the normal Delivery Business Day for settlement of Allowances under such a transaction. “DPRC Shortfall” = as defined above. “Default Interest” = interest at the Default Rate from the Delivery Date to the termination date per Part (d)(ii)(2)(B)(Failure to Comply Not Remedied) on DPRC Shortfall x any excess of the AP over EUAspot. view template Full text of Section Delivering Party’s Replacement Cost Delivering Party’s Replacement Cost: Means in respect of a failure of Receiving Party to accept delivery of a number of Allowances (the “DPRC Shortfall”), an amount equal to: (i) (1) the Allowance Purchase Price or Allowance Strike Price, as applicable, as set out in the Confirmation for the relevant EU Emissions Allowance Transaction plus, in those circumstances in which the relevant termination of the parties’ obligations under “Physical Settlement” occurs following a Suspension Event, the Close-out Cost of Carry Amount; less (2) the price (per Allowance) Delivering Party, acting in a commercially reasonable manner, does or would, in the determination of the Calculation Agent, receive in an arm’s length transaction concluded on the Final Compliance Date for an equivalent number of Allowances of the relevant Allowance Type to be delivered on the Final Compliance Date or, if later, the Delivery Business Day on which Allowances would be delivered in accordance with prevailing market practice under a spot transaction concluded on the Final Compliance Date; multiplied by: (ii) the DPRC Shortfall; plus (iii) interest at the Default Rate for the period from (and including) the Delivery Date to (but excluding) the date of termination in accordance with Part (d)(ii)(2)(B)(Failure to Comply Not Remedied) on an amount equal to the product of the DPRC Shortfall and an amount equal to the excess, if any, of the Allowance Purchase Price or Allowance Strike Price, as applicable, over the price determined pursuant to paragraph (i)(2) above. view template Comparison See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Content and comparisons

The same concept is covered, in a roundabout way, as follows in the different versions of the emissions trading documents:
ISDA: Delivering Party’s Replacement Cost
EFET: Seller’s Cover Costs
IETA: Delivering Party’s Replacement Cost

See also “Receiving Party’s Replacement Costs” (ISDA and IETA) or Buyer’s Cover Costs (EFET) for the converse position.

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