Today the European Securities and Markets Agency (ESMA) published its final report on the EU emissions trading system (EU ETS), in which it concluded that the market is working well.
The report found "no major deficiencies in the functioning of the EU carbon market", but recommended a number of improvements with regard to market transparency and monitoring
The recommendations include:
- extending position management controls over EU Allowance (EUA) derivatives;
- changes to EUA position reporting;
- tracking chains of transactions in regulatory reports required under the Markets in Financial Instruments directive; and
- providing ESMA with access to primary (auction) market transactions.
Furthermore, the ESMA report identified possible courses of action for the European Commission to consider related to position limits and enhanced market monitoring.
IETA welcomes ESMA's report, noting that it confirms that the EU ETS is working as intended and that carbon price developments reflect market fundamentals.
We support clear and efficient monitoring of the market. Any additional market oversight proposals should seek to assure proper market functioning without damaging liquidity or increasing price volatility.
IETA stands ready to engage in dialogue with the European Commission and other stakeholders about market oversight policy options following the publication of the report.
The full report can be found here.