C Day - Crunch time for the Carbon trading spivs

Today is the last trading day before Power producers, steel manufacturers and other smokestack industries have to submit data by Sunday proving that they have not exceeded carbon emission limits established under the first year of the insane, costly hugely over regulated, jobs for the Brussels boys, EU Emissions Trading Scheme, actually a vast financial casino that bets on the value of pieces of paper.

Explanation of spiv for transatlantic readers go here.

The EU ETS, developed to meet commitments under the Kyoto Protocol,(and enrich many bankers, banks, finance house, financiers, hedge fund managers, brokers, dealers, and the flotsam of wide boys and spivs in the commodity markets, not to mention many very expensive lawyers and attorneys all listed here) requires EU governments to limit how much CO2 their heaviest polluting industries can emit.

This is the time the folks who "provide their professional and business experience and expertise to global and national dialogues that are developing the key components of the greenhouse gas (GHG) market"... " who ensure that sectorial and geographic points of view are taken into account when new protocols and standards are explored and developed" ... find out just how good their advice was.Because in this casino, some win , some lose.

Companies exceeding their limits face a 40-euro fine per ton of excess CO2 if their carbon books do not balance at the end of the financial year. Everything has not gone smoothly for the scheme: five of the EU’s 25 states — Cyprus, Greece, Luxembourg, Malta and Poland — still have no registry where companies can access their carbon credits. Companies in those countries will not be able to surrender their allowances for checks by the European Commission, experts say. Poland has only a third of their polluters on their database.

“In the absence of the national registry, you’re never going to be able to surrender anything,” says Peter Zaman, a senior associate at Clifford Chance LLP, ( Head Honchos in the IETA) which advises banks and utilities throughout Europe on carbon-related issues. Zaman said companies in the EU’s other 20 countries could cry foul if their counterparts without national registries were exempted from this stage.

The European Commission has already launched legal proceedings against the countries for not complying with EU laws requiring the registries to be in place, a spokeswoman said.

There are more than 11,500 plants and installations in the EU EMS including oil refineries, steel plants, power stations and cement factories.

Companies will closely watch the publication of the emissions data on May 15, knowing that unexpected news could greatly impact the price of carbon credits, (which has slumped 50% to about Euros12 in a very thinly traded market in the last week) and therefore wholesale power costs.

The market slumped quite simply because the spivs are now out of the market, having taken their dues and are as I write enjoying the clear blue skies of a caribbean beach. The losses have been passed on in higher prices to the consumer of electricity and will continue to do so.

The market expects (hopes, prays on it's collective knees every night) an emissions shortfall — meaning total EU-wide emissions is greater original carbon credit allocations — with companies filling the gap by buying credits. “The market estimates a 80 to 90 million ton shortfall was (is ?) the London Market "conventional) wisdom.

Ruta Bubniene, policy officer at the Brussels-based Climate Action Network Europe, (over 360 members) said the process would prove that some countries had allocated more rights to pollute than necessary. “Over-allocation will become very visible after the surrender of the allowances,” she said. Their report said ..."There was a significant lack of transparency
in most Member States processes to determine their National Allocation PLans (NAPs). This has resulted in questions on the validity and legitimacy of the crafting and data within the NAPs." (see Table 1 Page 6) PDF Alert

Generally firms involved will be unconcerned about fines because they can borrow allowances already in their accounts for 2006 to cover shortfalls in 2005, (according to Clifford Chance’s Zaman.) But this is a one trick pony and cannot be repeated, the critical compliance deadline from the perspective of an operator is the 30th of April 2008 ... and a lot of smoke will come out of a lot of stacks by then... and mergers / take overs to confuse be sorted out in the accounting for carbon.

Is it a coincidence that la Beckett whose funding for farmers is a shambles, and a huge enthusiast for this type of gambling, has just moved on to sort out the FO ?