Poland is preparing a new system of emission trading of sulphur dioxides (SO2) and nitrous oxides (NOx).
According to the draft of the new statute, financial institutions won’t be admitted to the market (as well as traders and brokers).
But why the new law restricts the emissions market also as regards the range of possible types of civil contracts?
A new bill is now in the procedure of ministerial consultations. The version of July 17 of the draft of the bill is available at web pages of the Polish Ministry of Environment (ustawa o systemie bilansowania i rozliczania wielkości emisji dwutlenku siarki (SO2) i tlenków azotu (NOx) dla dużych źródeł spalania – the law on the system of balancing and settlement of sulphur dioxides’ (SO2) and nitrous oxides’ (NOx) emissions from a large combustion plants).
Several assumptions for the new system of emission trading have been made.
The first is, that the trading will be available only for operators of installations (see art. 14 para. 1 of the draft of the bill: “Contracts of sale of emission allowances can be entered into only by the operators of large combustion plants”).
Such a concept - to restrict access to the market to compliance entities alone - can be assessed as a controversial issue. It is obvious, that the said provision will have immediate, direct and disadvantageous influence on the liquidity of the new market. It is also probable, that the elimination from the market of important players – financial institutions, traders and brokers - will result in higher price of emission allowances.
Forcing above mentioned institutions away from the market, will consequently restrict access of emitting entities to broader financing.
Prohibiting financial institutions, traders and brokers (dealing on own account) from participating in the market make also that market devoid of hedging tools – which are so useful and common in other markets.
Unfortunately, official substantiation of the bill (attached to the version of the draft of July 17) does not consider above mentioned arguments. The said document does not state any reasons for a such severe restrictions of trade.
So, it is worth considering, that all potential participants have access to SO2 and NOx markets. It seems, that the proposed solution would contribute to the development of the market and its liquidity and stability.