Maciej Burny: EU ETS is moving toward a law-tax regime to encourage investment in low carbon technologies
Almost 150 experts debated the legal regulations of serving carbon efficiency, energy and industry. Market Stability Reserve, the problems associated with the phenomenon of carbon leakage, regulations MIFID II, REMIT and EMIR, as well as expectations for the Climate Summit COP21 in Paris – these were just some of the topics analyzed during the 4th edition of Emission & Energy Trading Summit, which was held on November 26 in Warsaw.
Jan Wouter Langenberg, Policy Officer, European Commission in opening presentation described the proposal for revision of the EU Emissions Trading System (ETS) Directive, which the Commission proposed in July 2015. The presentation also covered recent developments in relation to the EU ETS, as well as outlining the main changes that have been proposed for the EU Emissions Trading System for the period 2021-2030, including an overview of the general aspects, free allocation to industry and mechanisms for funding low carbon investments.
The panel discussion was moderated by mec. Agnieszka Łoniewska from law firm Domański Zakrzewski Palinka. As a panelist took part expert as follows: Dorota Zawadzka-Stępniak, Vice President of the National Fund for Environmental Protection and Water Management; Grzegorz Pogorzelski, Acting Head, Unit of Wholesale Markets Monitoring, Department of Market Development and Consumer Affairs, Energy Regulatory Office; Mariusz Więckowski, Partner, Areto; Maciej Burny, Director of Regulatory Affairs Office, Polish Energy Group S.A.; Dr. Stefan Pankoke, Deputy head of division, Federal Financial Supervisory Authority (BaFin), Germany; Michael Steurer, Policy Advisor, EUROCHAMBRES and Marcin Bruszewski, Legal Director in Fortum Power and Heat Poland.
According to experts upcoming requirements resulting from MiFID and MiFIR may prove to be difficult to master for those who have not previously been covered by the provisions of the first MiFID. Moreover, those regulations likely to eliminate from the market small traders engaged in speculative activities. Provision of the regulation is to increase trading safety, however, this will entail costs. The EU ETS is converted into para-taxes system - it contains less and less market components, more and more supply controls which would lead to that price of allowances will be so high that it rewarding to invest in low carbon technologies. Current trends in legal changes in the energy market moving towards risk reduction by increasing the transparency of transactions, eg. Through reporting obligations and share more data.
"The CO2 market is not a market that classically is governed by the laws of supply and demand. This is administratively controlled market. As long as this situation will take place it will be difficult to encourage market participants to peculate and be active on it. At the moment the winner is the one who first has access / knowledge on current or future decisions made by the regulator - said Marek Król,Vice-President of PGE Brokerage House, in his lecture and aptly commented on the issue of allowances for emissions and decreasing liquidity on the market.
Vice-President, during his lecture extensively commented on the dangers that exist in trade in goods. He especially strongly emphasized the current regulatory risks that have a substantial impact on prices volatility and forcasts of their level in the near future (year 2016): "Wholesale energy market depends on a number of fundamental factors, economic as well as legislation. Eg. Operational Force Reserve, which, once placed on the market has increased energy price by 10%. In 2016 will also be a change in the Maintenance Manual, which will result in further growth. "- expert said.
PGE Brokarage House representative stated that "the important issue is the situation of wind energy and the effects of the new support system introduced by the Law of RES. It was based on the results of the first auction, investors will join to build farms. This has a substantial impact on property rights market. If the auction system will bring the desired effect, logically, we can expect price increases. However, if investors do not accept the new support mechanism, we will soon witness similar prices to the level of substitution fee, which completely blocks the market. "- Król said. Despite a number of these risks, in the expert opinion, the property rights and CO2 emissions market will be stable in 2016 year.
Also the conference participants could hear lectures of Ingo Ramming, Managing Director and Co-Head of Commodity Solutions Commerzbank AG, Dr. Stefan Pankoke, Deputy head of division, Federal Financial Supervisory Authority (BaFin), Michael Steurer, Policy Advisor, EUROCHAMBRES, Paul Waine, Global Director, Commodity Risk Solutions, PLATTS and Gatis Junghans, Head of Trading at Latvenergo AS, Vice President at Elektrum Eesti OÜ/ Elektrum Lietuva UAB.
The article was prepared by CBE Polska Team on the basis of lectures and materials from the 4th edition of the International Conference "Emission and Energy Trading Summit", which was held on 26 November 2015.
The General Partner of the event was the Polish Energy Group (PGE).
To the conference had involved: Saga Commodities (Exhibitor) and Vertis Environmental Finance (Sponsor of the coffee break), the European Commission, the Energy Regulatory Office (URE), the National Fund for Environmental Protection and Water Management, BaFin, Fortum, Platts, Latvenergo, Elektrum, Areto, Commerzbank and law firm Domański Zakrzewski Palinka.
The Honorary Patrons were: Ministry of Economy, the National Fund for Environmental Protection and Water Management, IFIEC Europe, Confederation Lewiatan, Institute for Sustainable Development and EUROCHAMBRES.
Media Patrons: Oil Gas & Energy Law, the Power Market Review, Enerope, Carbon Pulse, The Energy Industry Times Business Alert ogrzewnictwo.pl, inzynieria.com, Fuel and Power ioze.pl, Magazine Economic Facts cire.pl, Polish Market, Warehouse Business Site and BizPoland.
Simultaneous translation was provided by company Bireta Professional Translations.
We thank all participants and partners and patrons involved in the event. We invite you to share with us your proposals and to participate in future meetings organized by us.
- CBE Poland Team
Jan Wouter Langenberg, Policy Officer, European Commission in opening presentation described the proposal for revision of the EU Emissions Trading System (ETS) Directive, which the Commission proposed in July 2015. The presentation also covered recent developments in relation to the EU ETS, as well as outlining the main changes that have been proposed for the EU Emissions Trading System for the period 2021-2030, including an overview of the general aspects, free allocation to industry and mechanisms for funding low carbon investments.
The panel discussion was moderated by mec. Agnieszka Łoniewska from law firm Domański Zakrzewski Palinka. As a panelist took part expert as follows: Dorota Zawadzka-Stępniak, Vice President of the National Fund for Environmental Protection and Water Management; Grzegorz Pogorzelski, Acting Head, Unit of Wholesale Markets Monitoring, Department of Market Development and Consumer Affairs, Energy Regulatory Office; Mariusz Więckowski, Partner, Areto; Maciej Burny, Director of Regulatory Affairs Office, Polish Energy Group S.A.; Dr. Stefan Pankoke, Deputy head of division, Federal Financial Supervisory Authority (BaFin), Germany; Michael Steurer, Policy Advisor, EUROCHAMBRES and Marcin Bruszewski, Legal Director in Fortum Power and Heat Poland.
According to experts upcoming requirements resulting from MiFID and MiFIR may prove to be difficult to master for those who have not previously been covered by the provisions of the first MiFID. Moreover, those regulations likely to eliminate from the market small traders engaged in speculative activities. Provision of the regulation is to increase trading safety, however, this will entail costs. The EU ETS is converted into para-taxes system - it contains less and less market components, more and more supply controls which would lead to that price of allowances will be so high that it rewarding to invest in low carbon technologies. Current trends in legal changes in the energy market moving towards risk reduction by increasing the transparency of transactions, eg. Through reporting obligations and share more data.
Maciej Burny, Director of Regulatory Affairs Office, Polish Energy Group S.A. (PGE SA) estimates that MSR will reduce the pool of emission allowances - which are available in the ETS - by 6%. "We are moving towards para-fiscal system - in this system is less and less market elements, and more and more elements controlling supply that will lead to the price of allowances be so high that it will rewarding investing in low carbon technologies. It is an ideological approach that can be distinguish between the 2 major trends. European Commission trend is thet the price should be so high that in a while it will be profitable to invest in renewable energy sources without additional subsidies, and in accordance with the economic approach, until we achieve the reduction targets, the lower the price is, that cheaper we achieve the goal. Each additional euro of allowance prices increases the price of 1 MWh by 1 euro " - said Maciej Burny. According to the estimates of the The Polish Electricity Association, reduction of CO2 emissions by 2030 will cost the Polish energy sector around 240 million PLN. Maciej Burny added that about 15-20% of these expenditures can be covered by the compensation. The expert believes that "compensatory mechanisms for the Poland in the EC proposal on the revision of the EU ETS does not neutralize the cost of climate policy for the electricity sector. Necessary capital expenditures are disproportionately high compared to the value of the derogation and the modernization fund - proposed compensation for Poland after 2020. We estimate that the derogation and modernization fund (Art. 10c and 10d) is up to 35 billion PLN. Meanwhile, spending on reducing emissions in the sector by 2030 of 30% is at least 240 billion PLN. "
"The CO2 market is not a market that classically is governed by the laws of supply and demand. This is administratively controlled market. As long as this situation will take place it will be difficult to encourage market participants to peculate and be active on it. At the moment the winner is the one who first has access / knowledge on current or future decisions made by the regulator - said Marek Król,Vice-President of PGE Brokerage House, in his lecture and aptly commented on the issue of allowances for emissions and decreasing liquidity on the market.
Vice-President, during his lecture extensively commented on the dangers that exist in trade in goods. He especially strongly emphasized the current regulatory risks that have a substantial impact on prices volatility and forcasts of their level in the near future (year 2016): "Wholesale energy market depends on a number of fundamental factors, economic as well as legislation. Eg. Operational Force Reserve, which, once placed on the market has increased energy price by 10%. In 2016 will also be a change in the Maintenance Manual, which will result in further growth. "- expert said.
PGE Brokarage House representative stated that "the important issue is the situation of wind energy and the effects of the new support system introduced by the Law of RES. It was based on the results of the first auction, investors will join to build farms. This has a substantial impact on property rights market. If the auction system will bring the desired effect, logically, we can expect price increases. However, if investors do not accept the new support mechanism, we will soon witness similar prices to the level of substitution fee, which completely blocks the market. "- Król said. Despite a number of these risks, in the expert opinion, the property rights and CO2 emissions market will be stable in 2016 year.
Also the conference participants could hear lectures of Ingo Ramming, Managing Director and Co-Head of Commodity Solutions Commerzbank AG, Dr. Stefan Pankoke, Deputy head of division, Federal Financial Supervisory Authority (BaFin), Michael Steurer, Policy Advisor, EUROCHAMBRES, Paul Waine, Global Director, Commodity Risk Solutions, PLATTS and Gatis Junghans, Head of Trading at Latvenergo AS, Vice President at Elektrum Eesti OÜ/ Elektrum Lietuva UAB.
The article was prepared by CBE Polska Team on the basis of lectures and materials from the 4th edition of the International Conference "Emission and Energy Trading Summit", which was held on 26 November 2015.
The General Partner of the event was the Polish Energy Group (PGE).
To the conference had involved: Saga Commodities (Exhibitor) and Vertis Environmental Finance (Sponsor of the coffee break), the European Commission, the Energy Regulatory Office (URE), the National Fund for Environmental Protection and Water Management, BaFin, Fortum, Platts, Latvenergo, Elektrum, Areto, Commerzbank and law firm Domański Zakrzewski Palinka.
The Honorary Patrons were: Ministry of Economy, the National Fund for Environmental Protection and Water Management, IFIEC Europe, Confederation Lewiatan, Institute for Sustainable Development and EUROCHAMBRES.
Media Patrons: Oil Gas & Energy Law, the Power Market Review, Enerope, Carbon Pulse, The Energy Industry Times Business Alert ogrzewnictwo.pl, inzynieria.com, Fuel and Power ioze.pl, Magazine Economic Facts cire.pl, Polish Market, Warehouse Business Site and BizPoland.
Simultaneous translation was provided by company Bireta Professional Translations.
We thank all participants and partners and patrons involved in the event. We invite you to share with us your proposals and to participate in future meetings organized by us.
- CBE Poland Team
