On 6 December, the European Parliament (EP) published a study titled "The role of financial operators in the ETS market," which investigated the role of financial actors, such as banks and investors, in the EU Emissions Trading System (ETS) and their role in determining price dynamics and volatility.
Following Russia's invasion of Ukraine, commodity markets – including the European Union Allowances (EUAs) - experienced significant volatility. According to the report "these price movements and the fact that additional financial actors became active on the market for EUAs during the past years, have prompted concerns over their influence on the EUA price amongst some lawmakers."
Importantly, the EP study found that "while new financial actors have entered the market, their impact on the price is likely limited to date." Additionally, the study states "excluding financials from the market altogether is generally seen as a step that would entail more risks than benefits at this stage, threatening market liquidity and price formation."
These findings are welcome and support FIA's advocacy against proposals that would exclude financial market participants from the EU ETS.
In September, FIA co-signed a letter with seven other trade associations on the importance of safeguarding the EU ETS and highlighting that a diverse ecosystem of participants ensures that the EU's carbon market is resilient, less costly to access, and better equipped to provide hedging and risk management solutions to companies. Ultimately, the letter urges policymakers not to impose the harmful restrictions related to the EU ETS.
- Sustainable Finance