Digital Assets Report


Like this article?

Sign up to our free newsletter

TGE obtains PFSA approval for CO2 auction platform

Related Topics

The Polish Financial Supervision Authority (PFSA) has unanimously granted approval to Towarowa Giełda Energii (TGE) to operate an auction platform for CO2 emission allowances.

TGE has met the requirements for the auction platform set out in the Regulation of the Minister of Finance of 14 January 2016 concerning the operation of the regulated market and auction platform.
“The possibility of launching a CO2 trading platform is an important step in the development of the Exchange but, first and foremost, a good news for Polish companies covered by the European Union Emission Trading System (EU ETS), as they will gain access to auctions organised in Poland and settled in two currencies – the Polish zloty and euro,” says Paweł Ostrowski, president of the management board of TGE. “For us, this means, in the first place, the participation in a procurement procedure for the selection of the national platform to organise primary market CO2 auctions, and then the process of appointment by EU authorities and entry on the list of auction platforms.”
Security of the settlement and clearing of the CO2 auctions will be guaranteed by the Warsaw Commodity Clearing House (IRGiT).
Commission Regulation (EU) No. 1031/2010 of 12 November 2010 on the timing, administration and other aspects of auctioning of allowances is the fundamental legislative act which regulates the auctioning of allowances. According to the regulation, the auctioning of the allowances should take place on a common auction platform. However, an exception is possible whereby member states of the so-called put-out group may auction allowances on a separate own platform. This option was chosen by Germany (EEX) and the UK (ICE), and currently by Poland which, until the selection of own national, auctions allowances through the Community EEX market platform.
The emission allowance trading is the fundamental instrument applied with a view to limiting the quantity of greenhouse gases introduced to the atmosphere. The underlying assumptions were laid down in Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community. The Directive provides the basis for the operation of the European Union Emissions Trading System – EU ETS. This means that all the allowances which have not been allocated free of charge in the trading period 2013-2020 are to be auctioned.
The so-called trading periods or phases make an important element of the operation of the EU ETS. Currently, we are in Phase III, which covers the years 2013-2020. Phase IV will begin in 2021 and end in 2030.
The system operates according to the “cap and trade” principle. For the system participants the acceptable emission allowance limit (“cap”) is set and it is gradually reduced over time so as to achieve the community reduction target. Within the established limit, emission allowances are either obtained free of charge or bought by system participants. A single emission allowance gives its holder the right to emit one tonne of CO2 or the equivalent amount of another greenhouse gas.
Each year, the system participant under the pain of a fine is required to settle the actual emission volume through redeeming the adequate number of emission allowances, or the bear costs calculated as the product of the so-called substitute fee and the shortfall volume. If the facility reduces its emission level, it may retain a portion of allowances held to cover its future needs, or e.g. sell them in the secondary market to another facility which is short of the allowances.

Like this article? Sign up to our free newsletter

Most Popular

Further Reading