EU Commission is taking steps to reinforce the robustness of the CO2 market

The European Commission adopted on 20 October 2011 a proposal for the review of financial market rules, bringing into their scope also emission allowances. As the carbon market has experienced significant growth in size and sophistication, it needs - according to the European Commission - a robust level of oversight to facilitate investments in the transition to a low-carbon economy. The lion's share of transactions in emission allowances are in the form of derivatives (futures, forwards, options), which are already subject to EU financial markets regulation. However, transactions for immediate delivery of allowances (also called "spot" transactions) are currently not subject to equivalent rules at the EU level and are not supervised. In the past, some carbon exchanges even "packaged" emission allowances as financial instruments (futures with a few days delivery period) which showed that many market participant…