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When the EU Emissions Trading System (EU ETS) started in 2005, it gave rise to the European carbon market. This market covers the trading in EU allowances and other units that may be used for compliance under the EU ETS in the 30 countries that currently participate in the trading system (EU-27 plus Iceland, Liechtenstein and Norway).
A carbon market…for whom?
In principle, anyone can trade in the carbon market, but currently the largest categories of traders are, on the one hand, energy companies and industrial companies that have obligations under the EU ETS, and, on the other hand, financial intermediaries, such as banks who often trade on behalf of smaller emitters and companies.
Preventing market abuse and other market misconduct
The European carbon market is relatively young and growing rapidly. As it gets more sophisticated, it is important that the rules that govern the market follow developments.
On 20 October 2011, the Commission adopted a proposal for the review of the financial markets rules, which will bring under their scope also emission allowances. This proposal, which will soon be discussed in the European Parliament and the Council in view of its adoption, aims to provide a safe and efficient trading environment to enhance confidence in the market.
In practice, coverage of all segments of the carbon market by the financial rules means that:
- high integrity standards apply to all market participants who are prohibited from engaging into manipulation through practices such as spreading false information or rumours
- companies with large installations regulated by the EU ETS cannot 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) are available to all market participants
- anti-money laundering safeguards (e.g. know-your-customer checks) are extended to all segments of the carbon market.
Exchanging views with stakeholders
The Commission has been able to benefit from an intensive and informative dialogue with stakeholders on the issue: in December 2010 when the new financial market rules were consulted, later again in May 2011 when it organised a dedicated stakeholder meeting on the carbon market oversight, as well as in the context of numerous discussions with individual stakeholders.
The relevant documents can be found through the "Related events" pages that you can see in the column in your right.