Energy and Utilities
Global topics
UN
Wikipedia on United Nations Framework Convention on Climate Change (UNFCCC):
- UNFCCC established an international environmental treaty to combat "dangerous human interference with the climate system", in part by stabilizing greenhouse gas concentrations in the atmosphere. It was signed by 154 states at the UN Conference on Environment and Development (UNCED), informally known as the Earth Summit, Rio de Janeiro 1992. It established a Secretariat headquartered in Bonn, Germany, and entered into force on 21 March 1994.
- The Kyoto Protocol, signed in 1997 and ran from 2005 to 2020, was the first implementation of measures under the UNFCCC.
- The Kyoto Protocol was superseded by the Paris Agreement, which entered into force in 2016.
- By 2022 the UNFCCC had 198 parties. Its supreme decision-making body, the Conference of the Parties (COP), meets annually to assess progress in dealing with climate change.
- Because key signatory states are not adhering to their individual commitments, the UNFCCC has been criticized as being unsuccessful in reducing the emission of carbon dioxide since its adoption.
- Different responsibilities for three categories of signatory states:
- Developed countries - 'Annex 1 countries' originally consisted of 38 states, 13 of which were Eastern European states in transition to democracy and market economies, and the European Union
- The US did not ratify the Kyoto Protocol, while Canada denounced it in 2012. The Kyoto Protocol was ratified by all the other Annex I Parties.
- Developed countries with special financial responsibilities - 'Annex 2 countries'
- Developing countries
- Parties to the Kyoto Protocol have a legal obligation to maintain a Kyoto Protocol registry. This registry enables account holders to hold and trade Kyoto units. Kyoto units are each equal to one tonne of carbon dioxide and can be traded on the international carbon market. Kyoto units held by the UK Government are used to demonstrate compliance with our emissions reduction targets under the Kyoto Protocol. Emission reduction commitments under the Kyoto Protocol covered the period from 2008 to December 2020. However, due to the time lag in collecting emissions inventory data, final accounting cannot be completed until several years after December 2020, hence the continued need for a registry. Future registry requirements under the Paris agreement, as the successor to the Kyoto Protocol, are due to be decided at COP 26 in November. (https://hansard.parliament.uk/lords/2021-04-13/debates/5A0EE917-0D0E-4B8F-B462-1D59B56C594E/GreenhouseGasEmissions(KyotoProtocolRegistry)Regulations2021)
Wikipedia on Clean Development Mechanism (CDM):
The CDM is a UN-run carbon offset scheme allowing countries to fund greenhouse gas emissions-reducing projects in other countries and claim the saved emissions as part of their own efforts to meet international emissions targets. It is one of the three Flexible Mechanisms defined in the Kyoto Protocol.
The CDM, defined in Article 12 of the Protocol, was intended to meet two objectives:
- to assist non-Annex I countries achieve sustainable development and reduce their carbon footprints;
- to assist Annex I countries in achieving compliance with their emissions reduction commitments
Certified Emission Reductions (CERs) are a type of emissions unit issued by the CDM Executive Board for emission reductions achieved by CDM projects and verified by a DOE (Designated Operational Entity) under the rules of the Kyoto Protocol.
CERs can be purchased from the primary market (purchased from an original party that makes the reduction) or secondary market (resold from a marketplace).
CERs can be held by governmental and private entities on electronic accounts with the UN.
EU Allowances (EUA) are climate/carbon credits used in the EU ETS. They are issued by the EU Member States into MS Registry accounts. By April 30 of each year, operators of installations covered by the EU ETS must surrender an EU Allowance for each ton of CO2 emitted in the previous year. The emission allowance is defined in Article 3(a) of the EU ETS Directive as being "an allowance to emit one tonne of carbon dioxide equivalent during a specified period, which shall be valid only for the purposes of meeting the requirements of this Directive and shall be transferable in accordance with the provisions of this Directive".
Because several countries with high emissions, including the US and China, either were not signatories of the Kyoto Protocol or were not required by it to reduce their emissions, most of the market for CDMs came from European countries. This, together with the recessions brought on by the global financial crisis and the European debt crisis, resulted in very low demand for carbon offsets, causing the value of CEDs to plummet.
Kyoto --> Paris
International credits are financial instruments that represent a tonne of CO2 removed or reduced from the atmosphere. At present (2022), international credits are generated through two mechanisms set up under the Kyoto Protocol. These are:
- Clean Development Mechanism (CDM) – allowing industrialised countries with a greenhouse gas reduction commitment (called Annex 1 countries) to invest in projects that reduce emissions in developing countries as an alternative to more expensive emissions reductions in their own countries. CDM provides for the creation of certified emission reductions (CERs)
- Joint Implementation (JI) – allowing industrialised countries to meet part of their required cuts in greenhouse gas emissions by paying for projects that reduce emissions in other industrialised countries. JI provides for the creation of emission reduction units (ERUs)
The Paris Agreement established a new market mechanism to replace the CDM and JI after 2020.
Emission trading
Emission trading - global
Wikipedia:
Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants.[1] The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). Carbon emission trading for CO2 and other greenhouse gases has been introduced in China, the European Union and other countries as a key tool for climate change mitigation. Other schemes include sulfur dioxide and other pollutants.
Wikipedia:
Carbon ETS are in operation in China, the European Union and other countries. However, they are usually not harmonized with any defined carbon budgets, which are required to maintain global warming below the critical thresholds of 1.5 °C or "well below" 2 °C. The existing schemes only cover a limited scope of emissions. The EU-ETS focuses on industry and large power generation, leaving the introduction of additional schemes for transport and private consumption to the member states. Though units are counted in tonnes of carbon dioxide equivalent, other potent GHGs such as methane (CH4) or nitrous oxide (N2O) from agriculture are usually not part these schemes yet. Apart from that, an oversupply leads to low prices of allowances with almost no effect on fossil fuel combustion. In September 2021, emission trade allowances (ETAs) covered a wide price range from €7/tCO2 in China's new national carbon market to €63/tCO2 in the EU-ETS.
All types of units have been assigned a different International Securities Identification Number (ISIN number) as they have become financially tradable assets. The structure of ISIN numbers is defined in the ISO 6166 standard and these numbers are used for uniform identification during trading and settlement.
More info: https://ec.europa.eu/clima/policies/ets/oversight/isin_en
Emission trading - EU
To participate in the EU ETS, companies or individuals have to open an account in the Union Registry. To open an account, they must send a request to the national administrator who collects and checks all supporting documentation.
Use of international credits in EU ETS phase 3 (2013-2020)
Participants in the EU ETS can use international credits from CDM and JI towards fulfilling part of their obligations under the EU ETS until 2020, subject to qualitative and quantitative restrictions.
Use of international credits in EU ETS after 2020
The EU has a domestic emissions reduction targetand does not currently envisage continuing the use of international credits for EU ETS compliance after 2020. The Paris Agreement lays out provisions on the use of markets to provide a clear and robust framework for linking carbon markets in the future.
European Allowances trading
Wikipedia on European Allowances trading:
The default method of allocating allowances, which were not allocated for free within EU ETS is auctioning. This is the most transparent allocation method, as it shows that polluters should pay and how much. The auctioning is governed by the EU ETS Auctioning Regulation, which ensures that it is conducted in an open, transparent, harmonized, and non-discriminatory manner. Currently, there are two auctioning platforms:
- European Energy Exchange (EEX), in Leipzig, is the common auction platform for the large majority of countries participating in the EU ETS and also conducts emissions auctions for Poland during the transitional period.
- ICE Futures Europe (ICE), the UK's platform. The first EUAA auction on ICE took place in September 2014.
- EU Allowance climate/carbon credits used in the EU ETS - Wikipedia
The EU ETS requires all annual emissions reports and monitoring to be verified by an independent verifier in accordance with the Accreditation and Verification Regulation. A verifier will check for inconsistencies in monitoring with the approved plan and whether the data in the emissions report is complete and reliable.
G20-FSB oversight
In 2017, the FSB-TCFD released climate-related financial disclosure recommendations to help companies provide better information to support informed capital allocation.
- FSB-TCFD - Task Forced on Climate-related Financial Disclosure
EU Regulatory
In accordance with the European Mifid II directive, emission allowances will be classified as financial instruments from 3 January 2018 in order to further strengthen the integrity and efficient operation of emission allowance trading.
EU EPA and ETS
EU ETS is a "cap and trade" scheme where a limit is placed on the right to emit specified pollutants over an area and companies can trade emission rights within that area. It covers around 45% of the EUs greenhouse gas emissions
General markets regulations
- EU 596/2014 on market abuse (market abuse regulation) (MAR)
- EU 57/2014 on criminal sanctions for market abuse (market abuse directive)
- EU 50/2013 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market
Electricity markets
- EU 714/2009 on conditions for access to the network for cross-border exchanges in electricity
- EU 2195/2017 establishing a guideline on electricity balancing
- EU 543/2013 on submission and publication of data in electricity markets
Energy markets
- EU 1227/2011 on wholesale energy market integrity and transparency (REMIT).
- Prohibits any trading based on inside information and deters market manipulation.
- Supports increased market transparency and integrity, open and fair competition, protects the interests of companies and consumers.
- EU 1348/2014 on data reporting implementing Article 8(2) and Article 8(6) of REMIT
Sources of information
On ACER and REMIT
- ACER the EU Agency for Cooperation of Energy Regulators
- ACER-REMIT portal
- Under REMIT, market participants shall publicly disclose inside information which they possess with regard to the businesses or facilities that they or their parent undertaking or a related undertaking own or control, or whose operational matters they or their undertaking are responsible for, either fully or in partially.
- Inside information should be disclosed in such a manner ensuring that it is capable of being disseminated to as wide a public as possible. This is why the disclosure of inside information through central platforms that aggregate urgent market messages from market participants is considered effective.
- In 2020, the Agency commenced the process of registering Inside Information Platforms (IIPs)
- About REMIT info site Regulation on Wholesale Energy Market Integrity and Transparency (REMIT)
On Transmission System Operators (TSO)
- ENTSOE European Network of Transmission System Operators for Electricity
- Central collection and publication of electricity generation, transportation and consumption data and information for the pan-European market.
- ENTSOE transparency information
On markets
Nominated Electricity Market Operators (NEMOs) include a.o. BSP, CROPEX, SEMOpx (EirGrid and SONI), EPEX, EXAA, GME, HEnEx, HUPX, IBEX, Nasdaq, Nord Pool, OMIE, OKTE, OPCOM, OTE, and TGE.
Exchanges
- Electric power exchanges in Europe - Wikipedia
- APX - part of EEX - NL, UK, BE
- APX
- An energy exchange operating the spot markets for electricity in the Netherlands, the United Kingdom, and Belgium. Established in 1999, APX provides exchange trading, central clearing and settlement, and data distribution services as well as benchmark data and industry indices. APX has over 180 members from more than 15 countries.
- EEX
- A central European electric power and related commodities exchange located in Leipzig, Germany. It develops, operates and connects secure, liquid and transparent markets for energy and related products, including power derivative contracts, emission allowances, agricultural and freight products.
Big players
Belgium
Basics
Production
Transport
Elia is the Belgian TSO. To help maintain the balance on the grid between generation and consumption, Elia has Balance Responsible Parties (BRP) at every access point.
Distribution
- Fluvius - distribution in all 300 Flemish communities, fusion of Infrax and Eandis
- Enodia - previously ALE, Tecteo, Publifin
Approval
- Vlaanderen.be - keuring electriciteit
- Elke elektrische installatie moet door een erkend controleorganisme gekeurd worden volgens ‘Boek 1 Installaties op laagspanning en zeer lage spanning van het AREI’, bij elke ingebruikstelling (vóór u de installatie in gebruik neemt), belangrijke wijziging of uitbreiding van de installatie, verzwaring van de aansluiting, en verkoop van een woning met een oude installatie.
- FOD Eco - AREI
- Electricien Vlaanderen
Enodia - previously ALE, Tecteo, Publifin
UK
The UK, Scottish and Welsh Governments and Northern Ireland Department of Agriculture, Environment and Rural Affairs are collectively making up the UK ETS Authority.
Remember:
- The term "Great Britain" refers to England, Scotland and Wales.
- The term "UK" refers to Great Britain plus Northern Ireland.
- gov.uk - energy emissions
- gov.uk - UK ETS
- UK ETS went live on 1 January 2021, replacing the UK’s participation in the EU ETS.
- Under the Ireland/Northern Ireland Protocol, electricity generators in Northern Ireland remained within the EU ETS.
- UK ETS auctions began on 19 May 2021 and are hosted by ICE Futures Europe (ICE)
- gov.uk - participate in UK ETS
- Free allocations are available for operators of eligible installations who applied for a free allocation of allowances for the 2021 to 2025 allocation period and for new entrants to the UK ETS. The free allocation application validity will be determined by the UK ETS Authority.
- Intercontinental Exchange (ICE) - Wikipedia
- US company
- owns exchanges for financial and commodity markets, and operates 12 regulated exchanges and marketplaces
- also owns and operates six central clearing houses: ICE Clear U.S., ICE Clear Europe, ICE Clear Singapore, ICE Clear Credit, ICE Clear Netherlands and ICE NGX
- ICE
- ICE Futures Europe
- Home to futures and options contracts for crude oil, interest rates, equity derivatives, natural gas, power, coal, emissions and soft commodities. Allows hedging against the future cost of jet fuel, petrol/gas prices at the pump, a change in interest rates or the cost of electricity.
- ICE UK auctions
- To access auctions on ICE Futures Europe, participants must satisfy the criteria set out in Articles 16 and 17 of the The Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021 (“the UK Auctioning Regulations”) and have the necessary regulatory permissions or exemptions.
- All participants must have an arrangement in place with an ICE Clear Europe Clearing Member.
- Auctions of United Kingdom Allowances (UKAs) take place every other Wednesday throughout the year, between 12.00 and 14.00 UK time.
- To participate in an auction you either need to be an Exchange Member, or go through an Exchange Member.
- You need to be registered in the Auction Participant List (APL).
- ICE Futures Europe membership
The UK Accreditation Service (UKAS) is responsible for the accreditation and supervision of verifiers in the UK and for maintaining a list of those verifiers.
US
Federal level - EPA
Wikipedia:
The US Environmental Protection Agency (EPA) began regulating greenhouse gases (GHGs) under the Clean Air Act ("CAA" or "Act") from mobile and stationary sources of air pollution for the first time on January 2, 2011. Standards for mobile sources have been established pursuant to Section 202 of the CAA, and GHGs from stationary sources are currently controlled under the authority of Part C of Title I of the Act. The basis for regulations was upheld in the United States Court of Appeals for the District of Columbia in June 2012.
Regional level
The Regional Greenhouse Gas Initiative, Inc. (RGGI, Inc.) is a 501(c)(3) non-profit corporation created to support development and implementation of the Regional Greenhouse Gas Initiative (RGGI). RGGI is a cooperative effort among eleven states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia – to reduce greenhouse gas emissions.