Questions & answers on technical requirements to use the Union Registry
TLS secures the transport of sensitive data by encrypting the network tunnels along which information moves. In other words, TLS is the mechanism that protects the confidentiality and integrity of all information entered by those using the Union Registry via their web browser.
TLS 1.2 has been updated to improve the security of operations in the Union Registry. TLS 1.2 was defined in 2008 and all major web browsers now support it by default. Since 2012, the Union Registry has maintained compatibility with previous versions of TLS, but since October 15 2015, connections with older versions will no longer work.
All recent browsers (Chrome, Firefox, Internet Explorer and Safari) support TLS v1.2 by default:
- Chrome, version 33 and above
- Firefox, version 34 and above
- Internet Explorer, version 11
- Safari, version 7 and above
Questions & answers on implementation of new registry rules regarding units from Joint Implementation (02/2013)
General Questions and Answers on Registries (05/2013)
The registries for the EU Emissions Trading System (EU ETS) record the holding of emission allowances and the transactions concerning those allowances, like any banking system does for money. The main types of transactions are: creation of allowances, free allocation, auctioning, trading, surrendering of allowances for compliance and their deletion. The registries also record installations and aircraft operators surrendering allowances to cover their verified emissions.
In the EU ETS, the possibility to use international credits directly, which was open to operators in the second trading period, is replaced in the third trading period by the exchange of eligible credits for allowances. The exchange mechanism is formally put in place by the updated Registries Regulation.
As regards international credits generated by Joint Implementation projects (Emission Reduction Units – ERUs), provisions are set out to implement rules set out in the ETS Directive and the Kyoto Protocol. For more details, see the FAQ on International Carbon Market.
Beyond the ETS, the Registries Regulation implements the accounting of transactions under the Effort Sharing Decision in the Union registry.
The Commission adopted the Regulation on 2 May 2013, and it entered into force on the day following its publication in the Official Journal.
The security of the registries has become a priority as a result of the fraud concerning emission allowances in 2010 and 2011. In early 2011 the Commission took immediate action by temporarily suspending all national registries until they fulfilled minimum security requirements. Additional measures were adopted in 2011 to bring the security of the Union registry into line with state-of-the-art security measures used in the financial sector.
The main security measures are summarised below.
|Main new security measures in the Regulation|
|A. Preventive measures to avoid fraud include:|
|Two-factor authentication (similar to the use of a token in online banking);|
|Out-of-band confirmation of transactions;|
|Introduction of a trusted account list;|
|Obligatory 4-eyes principle;|
|Strengthened know-your-customer checks for account holders and their representatives;|
|New account categories, including holding accounts and trading accounts. Trading accounts will offer more flexibility to transfer allowances than holding accounts.|
|B. Measures to respond quickly and effectively in case of fraud include:|
|Completion of transfers of allowances between registry accounts will in general be delayed by 26 hours: the seller will be able to cancel a fraudulent transaction within the first 24 hours (in addition to which the registry administrator will have two hours to execute the cancellation);|
|National administrators may freeze allowances and accounts in case of suspicion of fraud;|
|Wider access to confidential information held in the Union Registry will be given to competent national authorities: Europol will get a permanent ready-only access to the database;|
|Anti-money laundering provisions are further strengthened.|
|C. Measures to avoid disruption to the market, if fraud were to occur, include:|
|Allowances will be fully fungible, which means that an allowance can be substituted by any other allowance, if there were a legal claim;|
|Buyers in good faith will acquire full entitlement to purchased allowances;|
|Non-disclosure of the serial number of allowances;|
|Non-display of the serial number of allowances: they will be visible only to registry administrators, which may provide them on request to the competent national authorities.|
What does the fungibility of allowances mean? What happens in case of theft, breach of contract or insolvency?
A good or a commodity is "fungible" when individual units can be substituted by any other unit of the same good or commodity, like a kilogram of sugar. The fungibility of allowances envisaged by the Regulation implies that the claim – for instance in case of theft, breach of contract or insolvency of the account holder – cannot be directed at a specific allowance. This rule does not exclude claiming back the same amount of allowances or credits of the same kind or claiming damages, for example. Transactions in the Union Registry that became final are thus irrevocable and cannot be unwound.
No, the Regulation does not harmonise the ownership of allowances. However, apart from laying down that the allowances are fungible, it protects holders or buyers of allowances that are in good faith. Indeed, these persons will acquire full entitlement to the allowance. The interpretation of the term "good faith" is left to national law.
In early 2011, lists of serial numbers of allegedly stolen allowances were disclosed. That caused confusion in the carbon market, as in some jurisdictions stolen allowances identifiable through their serial numbers may have to be returned, which rendered trading more risky. To avoid such confusion in the future, the Regulation expressly prohibits the disclosure of the serial numbers of stolen allowances. Moreover, in the single Union Registry serial numbers of allowances are not visible to users, only to registry administrators, which may provide them on request to the competent national authorities. These measures are complemented by the fungibility of allowances and the protection of the buyer in good faith. Together this ensures that stolen allowances and the fraudsters involved can ultimately be tracked down for the purposes of a criminal or civil law procedure, but at the level of users trading is not disrupted.
In case of Kyoto units (e.g. Clean Development Mechanism credits), only the unique part of the unit identifier is not displayed: information on the unit type, the project number, etc. will remain visible.
The Regulation ensures that the EU ETS registry can function seamlessly and independently of decisions taken on the Kyoto Protocol. Only Kyoto units, which can be used for compliance in the EU ETS can be held on ETS accounts in the Union Registry. Kyoto units which are not eligible in the ETS can be held on accounts in national KP registries.
The Regulation may have to be reviewed to reflect the outcome of the work on market oversight and in the light of the experience gained with the security measures.
Questions and Answers on the use of the Union registry for airlines (05/2013)
Since 30 January 2012, aircraft operators can open accounts in the Union registry. Account requests and all required supporting documentation shall be verified by the relevant national administrator. Aircraft operators with an open account are able to receive free allocation as determined by their administering Member State
All aircraft operators covered by the EU ETS have to open an account in the Union registry. Based on a benchmark published by the Commission in September 2011 Member States calculate the amount of allowances to be allocated for free to each aircraft operator in accordance with the rules set out in the EU ETS Directive. Aircraft operators with an open account have received the first annual batch of free allowances credited on their registry account by 28 February 2012. In total, approximately 181 million aviation allowances will be handed out to airlines for free in 2012.
Aircraft operators covered by the EU ETS also have to complete a number of steps in the registry to ensure that they comply with the EU ETS. These include a requirement to enter verified emissions in the registry by 31 March of each year after 2012 (e.g. by 31 March 2013 they had to ensure that verified emissions for 2012 are entered in the Union registry) and a requirement to surrender by 30 April of each year a sufficient number of aviation allowances, general allowances and/or international credits to cover their emissions from the previous year(s) (e.g. by 30 April 2013 they had to surrender units covering emissions from 2012).
As other account holders in the Union registry, aircraft operators are able to transfer allowances and international credits to other participants in the EU ETS.
Questions and Answers on banking of emission allowances and exchange of international credits (05/2013)
The ETS Directive does not allow the use of allowances from the second trading period for compliance in the third trading period. However, it ensures the banking of allowances from the second trading period, to the third trading period, which will take place in 2013.
The banking of allowances is carried out, as foreseen in article 57 of the Registries Regulation (No. 920/2010), through the deletion of phase 2 allowances and simultaneous creation of an equal amount of phase 3 allowances on the same registry accounts. The most recent amendment of the Registries Regulation also aims clarified the banking rules related to aviation allowances, such that 2012 aviation allowances are carried over to phase 3 without any change in their designation as aviation allowances.
Is the banking of allowances from the second to the third trading period limited only to operator accounts?
No, the banking of emission allowances applies to all holdings of phase 2 allowances in users' accounts in the Union registry.
The process of banking the emission allowances from the second trading period to the third is automatic and is expected to start on 1 July 2013. The process requires the closure of the Union Registry for five consecutive working days. Access to the Union Registry will be suspended as of 1 July and will be resumed no later than 8 July.
Is the Commission Regulation establishing a Union Registry for the periods ending on 31 December 2012 for Union ETS (No. 920/2010) also applicable to banking and other processes after 1 January 2013? What is the legal basis governing the operational steps as regards banking of emission allowances?
Article 57 of Regulation No 920/2010 provides for the banking of allowances from the second trading period to the third.
No, the Commission is not considering any changes related to the ability to bank allowances between phases. The possibility of banking of allowances is central to price formation and a long-term price signal to drive investment in less carbon-intensive capital stock and innovation.
What guarantees does a company with a compliance obligation under the EU ETS holding an international credit have in the EU ETS legislation as regards their exchange from the second trading period?
The revised ETS Directive allows for CERs and ERUs to be exchanged into allowances up to the limit defined for the use of these units. The detailed modalities for this exchange are set out in the the Registries Regulation. Exchanges of eligible credits up to the allowed limit are guaranteed until 31 March 2015.
The limit on the use of international credits pursuant to Article 11a(8) of the EU ETS Directive will be established by a separate Commission Regulation.
According to the Kyoto Protocol, Parties may choose to bank CERs and ERUs (process called carry-over in the Kyoto Protocol) up to a level equal to 2.5% of a Party's initial assigned amount for CERs and 2.5% for ERUs. This limit on carry-over under the Kyoto Protocol is a limit applied at the Party (i.e. Country) level. In other words, this is an entitlement given to Member States. The extent that this entitlement to carry-over is granted to private entities by a Member State is a matter for national consideration, subject to general principle of EU law on non-discrimination between entities on the basis of nationality.
Questions and Answers on the activation of the trusted account list and trading accounts (31/08/2012)
Each holding account and trading account may have a trusted account list. This list contains accounts specified by the account holder to which transfers can be executed trustfully.
Accounts held by the same account holder are included automatically on the trusted account list. The addition of other trusted accounts can be proposed by any authorised representative of the account holder.
As for transactions, a delay is applied between the approval and the execution of the request for an addition of an account to the trusted account list; the addition will be effective seven (7) days after the proposal has been confirmed either by an additional authorised representative (or by another authorised representative if no additional authorised representative has been appointed).
Holding accounts can only make transfers to accounts specified in their trusted account list. Such transfers do not require the approval of an additional authorised representative, but remain subject to the 26-hour delay. The account holder can however also choose to maintain the need for approval of each transfer by an additional authorised representative.
Trading accounts may also have a trusted account list. As for the holding accounts, transfers may be confirmed by an additional authorised representative. In addition, transfers from a trading account to an account on the trusted account list are not subject to the 26-hour delay.
Contrary to the holding accounts, trading accounts are allowed to make transfers to accounts outside their trusted account list; in that case, transfers are subject to the 26-hour-delay and must be confirmed by an additional authorised representative.
The different situations are summarised in the table below:
|From||To accounts in the trusted account list||To other accounts|
|Holding account||26h delay, no AAR approval unless requested by the account holder||Forbidden|
|Trading account||No 26h delay, no AAR approval unless requested by the account holder||26h delay, AAR approval required|