EU Emissions Annex: Difference between revisions

EU Emissions Annex (view source)

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-#redirect[[EU Emissions Anatomy]]
+{{a|emissions|}}Some thoughts on what emissions trading documents should do, given the idiosyncrasies of the European compliance carbon market.
+====It’s entirely dependent on regulation====
+The compliance emissions business is entirely a function of prevailing regulation: an emissions allowance is a regulatory derivative (compare with the voluntary carbon market, which is more like a fashionable opinion derivative).  Unlike any other asset, its “issuer” has virtually unlimited ability to change the terms of the market — including by abandoning it altogether — without any sanction. (Central banks can freely restructure their debt, but do it on pain of censure by the bond and credit derivative markets).
+Not only can the regulators change the terms of the EU Trading Scheme, but they do. It has structural changes — compliance phases — and the regulators also consider ad hoc changes from time to time, to shut down the inevitable speculative loopholery that comes from a new and inchoate asset class. Crypto is going through he same kind of thing.
+This means owning an {{euaprov|Allowance}} is a fraught occupation. And financing an Allowance owned by someone else, is an even more fraught occupation. Hence, the terms on which one buys and sells — and sells ''forward'' — are import to the stability of the market.