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EU leaders back probe of carbon market speculation


22 Oct 2021 06:59




22 Oct 2021 06:59

(Montel) EU leaders have backed the European Commission (EC) plan to study whether certain carbon market trading behaviours need further regulation as part of its response to soaring energy prices at their summit late on Thursday.

Countries such as Poland and Spain have called for curbs on financial market participants’ access to the EU ETS, claiming speculative trading had too much influence on carbon prices.

The EC said last week that it would ask the EU’s financial watchdog, the European securities and markets authority (Esma), to examine trading behaviours in the carbon market and produce a first report by 15 November.

It wants Esma to produce a more detailed analysis by early 2022 and would assess then “if certain trading behaviours would require further regulatory actions.” Formal EU regulation usually takes at least 18 months to two years to agree and become binding.

Esma is already considering a complaint of alleged market abuse by financial investors in the ETS amid this year’s price surge.

Earlier in October the EC had warned against ad hoc interventions in the carbon market, however, arguing that this would undermine trust in the market and create uncertainty for investors in low-carbon technologies.

It said there was “no evidence in recent market information that speculation is a major driver of EU carbon prices” in its “toolbox” published on 13 October outlining its response to recent unusually high energy prices.

EU energy ministers plan to discuss the price spikes and toolbox at an extraordinary meeting on Tuesday. EU leaders also plan to discuss these issues again at their summit in December.

Swift consideration
They called on the EC and national governments “to swiftly consider medium- and long-term measures” that would promote affordable energy, security of supply and resilience of the internal energy market and system, as well as supporting the bloc’s transition to climate neutrality. Such measures should take account of individual countries’ specific situations.

EU leaders also backed the EC’s plan to review the gas and power market designs. The EC said on 13 October it would ask EU energy regulatory authority Acer to provide a first assessment of the power market design by mid-November and recommend measures by April for the EC to follow up as needed.

The EC is also in the middle of developing new rules intended to promote renewable and decarbonised gases as part of the EU’s efforts to have net-zero emissions by 2050. It planned to propose these in December, and would also now look at gas storage, joint gas buying, and security of supply issues, said EU energy commissioner Kadri Simson on 7 October.

EU leaders also called on the European Investment Bank, which is financed by EU countries, to look at how to speed up investment in the energy transition away from fossil fuels to help reduce “future disruption risks.”

Much of the recent energy price rise has been linked to strong global demand for natural gas as economies recover from the pandemic. The EC’s long-term goal is to reduce the EU’s dependence on fossil fuel imports to improve energy security and help the bloc achieve its 2050 climate goals, said Simson.

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