The European Securities and Markets Authority (ESMA) published on 18 November its preliminary report on the European Union’s Emissions Trading System (ETS) - the European carbon market - responding to a request from the European Commission in the context of the fight against rising energy prices.
In response to an urgent request from some Member States, according to which speculation in the carbon market contributes to increasing energy prices, the European Commission mandated that ESMA examine the existence of possible anti-competitive commercial behaviour by ETS participants (see EUROPE 12811/1).
The agency’s preliminary report thus provides an analysis of the change and volatility of the prices of European emission allowances (EUA) and derivatives.
In particular, it shows that the number of counterparties holding a position in EUA futures has tended to increase since 2018 across all counterparty categories, in relatively homogeneous proportions, in line with the observed expansion of the ETS.
Open positions are to a large extent and at almost equal levels held by investment firms/credit institutions (40-47% depending on the period) and non-financial counterparties (45-50%). The remaining percentage of open positions held by investment funds and other financial counterparties remains relatively small (around 8%).
In addition, the report highlights that the distribution of open positions across different categories of counterparties does not appear to have changed significantly since 2018 and is broadly in line with the expected functioning of the market.
ESMA will submit its final report to the European Commission early next year.
See the report: https://bit.ly/32dO0oi (Original version in French by Damien Genicot)