Template:Emissions scope comp

There is no real comparison between the three documents on scope. This is on account of their very different lineages:

ISDA

The ISDA EU Emissions Annex is crafted not as an Appendix to the 2005 ISDA Commodity Definitions — which is how it started — nor as a standalone definitions booklet, but rather as a “Part 7” to an ISDA Schedule. This explains its rather odd numbering system, and the uncomfortable fact that its main number, the 7 is square bracketed, since whether it is a 6, 7, 8 or 9 depends on whether you already have put something else as a Part 6 or 7 in your Schedule.

Seeing as the ISDA EU Emissions Annex is, in its current edition (v 7) some 38 pages long, and therefore longer than the ISDA Master Agreement in its entirety, not just the Schedule, we rather think it deserves its own booklet.

If it had its own booklet, you could integrate other similar “compliance” regimes UK Allowances, for example, and perhaps Californian ones, and you might be able to make it “master-agreement agnostic”. Just a thought.

EFET

The EFET Allowances Appendix is structured as an appendix to the EFET agreement, and you can take your pick — and it won’t matter much — whether you choose the EFET Power or Gas format.

The Annex does its work by amending terms in the EFET Master Agreement itself to be relevant to emissions trading. The terms that are not amended we have labelled green.

Power and Gas trading both involve connecting to a grid and trading a physical commodity with the attendant risks that implies: things can blow up, go off, be off-spec, and the grid needs to be balanced and so on. Emissions certificates are financial instruments and so are much easier. Much of the amendments is to overcome this difference. But some traces of the EFET’s “physical trading network” genealogy remain.

IETA

The IETA is the only dedicated Emissions trading document. This is good if you don’t want the bother of the physical energy trading bits and bobs, or if you are not a full-scale ISDA ninja — but few participants in the emissions trading market are neither energy traders nor financial derivatives traders. Financially regulated users will want the benefit of netting opinions — which they will have under the ISDA — and non-financial energy traders will want an agreement format they are used to, so we suspect the IETA will be the least commonly used of the three.

As such IETA Master Agreement starts off with a “single agreement” clause. As we go on, you will notice some similarities with the 1992 ISDA. So many, in fact, that you may start to wonder why they didn’t just use a 1992 ISDA, and make this into a specific definitions booklet. Perhaps the pioneering emissions traders weren’t ISDA ninjas, didn’t want to pay ISDA membership fees, something like that? Hard to know.

If you are an ISDA ninja, you won’t need me to tell you that this is a single agreement, or what it is for.