Cost of Carry Amount - IETA Provision
IETA Emissions Trading Master Agreement
A Jolly Contrarian owner’s manual™
Cost of Carry Amount and 13.4(c) in all its glory
See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs
Resources and Navigation
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
Interestingly, the ISDA and the EFET have a “default” Cost of Carry Provisions too (the ISDAs’ being labelled Close-out Cost of Carry Amount and so on, the EFET’s Default Cost of Carry Amount, but the IETA does not.
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.
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?
- The JC’s famous Nutshell™ summary of this clause
- A closer inspection of the maths and terminology, to compare and contrast approaches across the agreements.