Emissions Trading

Optimize the number and structure of emission allowances.

How may we
assist you?

Negotiate forward
purchase and
sale of EUA and CER
allowances or credits 

Optimize the number and structure of allowances held

Contribute to cleaner environment based on market driven mechanisms

Negotiate each transaction with a KB dealer on the phone

Monitor parameters of every agreed transaction

USEFUL INFORMATION

  • It is an instrument introduced on the basis of the Kyoto Protocol
  • The objective is to reduce overall greenhouse gases emissions using market driven mechanisms
  • One allowance represents the right to emit one ton of CO2 equivalent
  • Allowances may be sold and purchased
  • Negotiate forward purchase and sale of EUA and CER allowances or credits

Market risks

  • Risk of price fluctuation of traded allowances over the transaction term
  • Allowance prices may be subject to unpredictable volatility, resulting in losses

Example of market risk

On 1 March 2014, a client negotiated a forward sale with the bank (settlement on 15 March 2015) involving 1,000 allowances with the agreed price of EUR 5.50 per allowance. However, on the settlement date, the current market price amounted to EUR 6.50 per allowance. The client incurred a loss of EUR 1,000 from the forward sale (the bank pays EUR 5,500 to the client; however, he could currently sell the allowances for EUR 6,500 in the market).

Delivery risks

  • Allowance settlement system does not involve any “delivery vs. payment” guarantee
  • Settlement of allowances in the OTE Register (separately), while money is remitted in a standard manner – i.e. via bank transfers based on issued invoices
  • The party that pays (or delivers) first, bears a risk of default of the other party

Legal risks

  • Structural risk of the emissions trading system termination
  • Associated with potential risks that the entire system set up in line with the Kyoto Protocol could be discontinued without any compensation to involved parties

Foreign exchange risks

  • Emissions trading transactions are usually denominated in EUR; therefore overall positions of Czech residents depend not only on changes in allowance price, but also on the CZK/EUR exchange rate fluctuations

Operational risks

  • Risks associated with delivery of tax documents (invoices) – in case such documents are not delivered in time or required scope/quality, there is a risk associated with communication with tax authorities
  • Problems associated with transaction administration in OTE accounts (communication with the register – blocked account in case a password is forgotten, system temporarily down, etc.)

This product is intended for legal entities, particularly operators of facilities that represent pollution sources.