Climate Brief N°16 « Applying MiFID to the EU ETS: what are the implications? »
The European Union is moving ahead with a proposal to regulate trading in carbon assets under the revised Markets in Financial Instruments Directive (MiFID). This would mean that all trading in such assets, from the European Union Emissions Trading System (EU ETS) to international carbon credits from Kyoto project-based mechanisms eligible for the EU ETS would be covered by the existing EU regulatory framework for financial markets. Allowance spot and derivative markets are set to be supervised by a single oversight authority, and the MiFID and Market Abuse Directive will apply. While this will bring benefits in terms of improved security, transparency and protections for market participants in the carbon market, future challenges for the EU ETS will involve the proper coordination of MiFID with the Auctioning Regulation, and ensuring that the ad hoc treatment of emission allowances is maintained within the MiFID legislation.