Emissions trading set to put foot on the gas

After Sibex started emissions trading – since gas certificates have become securities as part of a new measure implemented by the National Securities Commission – the Bucharest Stock Exchange is now preparing to become a player on the greenhouse gas emissions market. Despite the NSC move the number of transactions is still extremely low, while the market is waiting for clarification of the VAT regime and other procedural aspects of the trading system for the allowances.

Dana Ciuraru

The Romanian trading system for greenhouse gas emission allowances (EUA certificates) is getting a facelift. The National Securities Commission (NSC) recently categorized the emission allowances as a security, which can also be traded on the local capital markets.

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According to Sibiu Monetary Financial and Commodities Exchange (Sibex) specialists, transactions with EUA certificates have been possible since January 22 of this year.

As expected, the NSC measure has piqued the interest of both the Sibex and Bucharest Stock Exchange (BSE).

BSE officials told Business Review that they are interested in developing this trading scheme as

they want to diversify the portfolio of services offered to their

investors.

“The NSC specifications to label an EUA certificate as a security opens new opportunities for the organization of a regulated market through which demand and supply for such products can meet. The BSE is interested in expanding the range of products and services we can offer to investors. The transactions closed on the BSE market follow the complete circuit, at the central depository, for the clearing and settlement operations involved,” said Anca Dumitru, general manager of the BSE.

While the BSE has recently expressed its interest, Sibex is a step ahead, having already started trading EUA certificates.

“In January we registered ten transactions at RON 53.04 per ton. The following transactions with EUA certificates were closed on March 5, when 44 contracts were transferred at RON 53 per certificate. To launch transactions with carbon dioxide emission allowances, Sibex connected the Romanian Clearing House to the National Environmental Protection Agency system,” Sibex economist Cristina Padure told BR.

While the subject appears technical, EUA certificates are issued under the EU system of greenhouse gas emissions trading (EU ETS), one of the pillars of EU policy relating to climate change and pollution reduction.

Under this system, EU member governments establish national maximum levels for greenhouse gas emissions and set maximum limits for industrial operators in each country.

For the period 2008-2012, the European limit is 2.08 billion in allowances per year. Of this amount, Romania’s share is 75.9 million tons annually, meaning 3.6 percent.

Six companies have received almost half of the total 379.7 million certificates allotted to Romania. Those companies that cannot keep their carbon dioxide emissions within the limit allotted must buy extra certificates from those who do not use up their allowance.

NSC change gives rise to new issues

The NSC measure to label the emission allowances as securities has a web of implications. Specialists say while the move could boost the stock exchanges in this area, which many players would welcome, certain aspects remain opaque.

“One problem which still requires clarification is the VAT regime on EUA certificate transactions. Before the NSC’s announcement, these types of transactions were subject to VAT, but, as we know, deals involving securities are VAT exempt. Therefore clarification of this issue from the Finance Ministry is more than welcome,” Razvan Pasol, Intercapital Invest GM, told BR.

Furthermore, Pasol believes that the national legislation in this area should be correlated with EU regulations, as the mechanism to reduce gas emissions and trade EUA certificates is established at European level.

“Also, the measure taken by the NSC blocks the activity of those intermediaries specialized in EUA certificate trading, who are not part of the capital markets, which could reduce the trading market overall,” said the GM. Intercapital Invest carried out the first EUA certificate stock transaction in Romania and, according to Pasol, “We have big plans to develop this market along with our partners.”

Currently, the price of EUA certificates has reached the same value as these certificates are going for on the largest European stock exchanges, like Bluenext (France) and the European Climate Exchange (Great Britain).

“On the Sibex market the certificate price is set by supply and demand. The last transaction was carried out at a price of RON 53 per ton (EUR 13/ton), while the Bluenext market price of a ton of CO2 was EUR 13.15. The evolution of this market depends solely on the wishes of the holders of the certificates,” said the Sibex economist.

Although welcomed by market specialists the impact of the NSC measure is not yet obvious: for the moment, at least, the number of transactions is still extremely low, while the market is still calling for clarification of the VAT and other procedural issues. But this is a first step.

dana.ciuraru@business-review.ro