EU ETS allowances
The legal nature of EU emission trading system (ETS) allowances (2016-2017)
Client: DG Climate Action
The general objective of this study is to provide further clarity on the legal nature of allowances, not covering the carbon units (e.g. AAUs, CERs, ERUs) issued as per the Kyoto protocol to the UNFCCC25.
The specific objectives of the study are:
- to outline the characteristics of allowances which are typical of private property rights, of administrative rights or of sui generis rights, based on the current EU legislation, the national Member States regime, and case law;
- to provide a detailed comparative legal analysis of the treatment of allowances in five Member States: Belgium, Germany, France, Poland and the UK;
- based on consultations with relevant stakeholders to identify the main issues related to the legal nature of allowances which might have practical implications on the legal certainty, investment confidence and liquidity of the carbon market. In particular the following aspects related to the legal nature of allowances should be considered: property right, establishing security interest, insolvency, taxation, accounting, and criminal justice.
- to identify any consequences of the allowances being recognised as financial instruments under MiFID II with relation to the general legal nature of allowances and in particular on the issues identified under (iii). The analysis should take into account the general EU law and the national provisions of Belgium, Germany, France, Poland and the UK;
- to present possible options for providing further clarity on the legal nature of allowances in view of the issues spelled out under (iv) with clear identification of the proposed remedy instruments (changes to the relevant legal framework or soft law measures). The options and respective remedy tools should be analysed against their feasibility, practical nature, benefits and required effort.