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Ensuring the integrity of the European carbon market

The European carbon market is growing rapidly. As it gets more sophisticated, it is important that the rules governing oversight of the market keep pace with its development and adequately address risks that may arise.

 

In principle, anyone can trade in the carbon market. The main categories of traders are energy companies and industrial companies that have obligations under the EU ETS, and financial intermediaries such as banks which also act on behalf of smaller companies and emitters.

Green biofuel © iStockphoto

Preventing market abuse and other market misconduct

To ensure a safe and efficient trading environment and to enhance confidence in the market,  the scope of revised rules governing financial markets will include all segments of the carbon market. The revised rules have been adopted by the Council and the European Parliament.

The reviewed Markets in Financial Instruments Directive and Regulation will be applicable as of January 2017. The reviewed Market Abuse Regulation will be applicable as of July 2016.

This means:

  • High integrity standards will apply to all market participants, who would be prohibited from engaging in manipulation through practices such as spreading false information or rumours;
  • Companies with large installations regulated by the EU ETS will not be able to profit from inside information at the detriment of other market participants;
  • Better transparency and simpler access to information (e.g. how much is traded and at what price on carbon exchanges) will be available to all market participants;
  • Anti-money laundering safeguards (e.g. know-your-customer checks) will be extended to all segments of the carbon market.

The European Securities and Markets Authority (ESMA) has launched a consultation process in the context of the implementation of the reviewed rules that also addresses specific issues for the EU ETS. The Commission invites all carbon market participants to provide their views on these and other forthcoming consultations to ensure that they are taken into due account in the final proposals.