The EU's greenhouse gas emission allowances as financial instruments

• Autor(a) principal: Saraiva, José Miguel R.
• Data de Publicação: 2021
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/145384
• topic: Direito

The European Union climate policy has known significant developments over the last decades, endorsing measures, actions and legal instruments that seek the reduction of greenhouse gases emissions to the atmosphere, which lead to climate change and other undesirable consequences. Such policy has been pursued resorting to market reorientation, in which increasing energy efficiency of productive activities has been incentivised through the creation of a cap-and-trade system. The 1997 Kyoto Protocol paved the way for the worldwide introduction of market mechanisms that would seek the improvement of energy efficiency for the most polluting industries, thus leading them to reduce their needs of fossil fuels to back their activities, such as the International Emissions Trading, the Clean Development Mechanism and Joint Implementation. Following such efforts, the European Union, in 2003, endeavoured the creation of an Emissions Trading Scheme and has since witnessed a significant reduction in the emissions of greenhouse gases, which vouches for the apparent success of this carbon market system that has also inspired other countries and regions to idealise similar mechanisms. The European Union’s Emissions Trading System was a political and legal innovation, based on the quantification, measurability, and pricing of greenhouse gases emissions and their representativeness through permits that are to be distributed amongst the main contributors to those emissions, either through auctioning or free allocation. Also, environmental awareness has become a growing concern for market players, especially in what regards financial markets, and phenomena like ESG risk integration and financial instruments directed towards sustainable projects, such as green bonds, have risen exponentially. Therefore, placing finance at the service of environmental goals has occurred not only through binding legal frameworks, but also by the market agents’ own initiative and voluntary soft law instruments published by various international organisations. The creation of tradable emission allowances, and especially its inclusion as a financial instrument under MiFID II, fires up the discussion regarding the legal nature of allowances, especially around the type of financial instrument it truly is.