Cost of Carry Amount - EFET Allowance Provision

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2007 EFET General Agreement
Version 2.1(a) (Power)

A Jolly Contrarian owner’s manual™

Cost of Carry in a Nutshell

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Cost of Carry in all its glory

Cost of Carry Amount has the meaning specified in § 7.5(d) (Cost of Carry);

Cost of Carry Calculation Period” means the number of calendar days from and including the original Due Date which would have applied but for delayed delivery to, but excluding, the delayed Due Date resulting from delayed delivery;
Cost of Carry Rate” means the “EUR-EuroSTR-COMPOUND” interest rate in respect of each day in the Cost of Carry Calculation Period, provided that if the interest rate would otherwise be less than zero, the interest rate shall be floored at zero and any margin applied thereto;

(d) Cost of Carry on Delayed Deliveries. In the event that all or part of the Contract Quantity of a SE Affected Transaction is Transferred to Buyer on or before the Delayed Delivery Date, Buyer shall pay to Seller an additional amount (the “Cost of Carry Amount”) calculated at the Cost of Carry Rate for the Cost of Carry Calculation Period on the product of the number of Allowances so Transferred and the Contract Price for the relevant Allowance Transaction, divided by three hundred and sixty (360). Such Cost of Carry Amount shall be identified in the relevant invoice.


See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs

Resources and Navigation

Index: Click to expand:

Emissions trading documentation
ISDA: EU AnatomyEU Wikitext EU Nutshell (premium) • UK AnatomyUK Wikitext (to be merged into EU Anatomy)
IETA: IETA Master AgreementIETA WikitextIETA Nutshell (premium)
EFET: EFET Allowances AppendixEFET Allowances WikitextEFET Nutshell (premium)



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.

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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