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25 - Can Financial Regulation Truly Support the Reduction of CO2 Emissions?

The Complicated Puzzle of EU Emission Allowances

from Part V - Financial Innovation and Sustainability

Published online by Cambridge University Press:  30 January 2025

By
Filippo Annunziata
Edited by
Kern Alexander ,
Matteo Gargantini  and
Michele Siri
Kern Alexander
Affiliation:
University of Zurich
Matteo Gargantini
Affiliation:
University of Genoa
Michele Siri
Affiliation:
University of Genoa
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Summary

This chapter discusses the implications of the inclusion of emission allowances within the scope of EU capital markets legislation, and its interrelations with other relevant sources of EU law, namely the Emissions Trading Schemes and REMIT. The process leading to the comprehensive treatment of emission allowances by EU capital markets legislation began with MiFID I and reached its peak with MiFID II, that includes EUAs within the definition of financial instruments. This inclusion also implies that EUAs are subject to the provisions of the Market Abuse Regulation. This phenomenon raises several issues, first and foremost those that concern coordination between different legal texts. It also raises the question as to whether capital markets legislation is indeed capable of supporting the ultimate goal that the entire regulation of EUAs pursues, that is, the reduction of emissions. Whereby there is still insufficient empirical evidence as to whether this is effectively the case, EU legislation seems to believe in an assumption that would need to be better verified overtime.

Keywords

emission allowancesemissions trading schemeinterplay between EU legislation and emission allowancessecondary market
Type
Chapter
Information
The Cambridge Handbook of EU Sustainable Finance
Regulation, Supervision and Governance
 , pp. 643 - 662
Publisher: Cambridge University Press
Print publication year: 2025

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