MAR and the emission allowance market

General information about the emission allowance market

Through the Greenhouse Gas Emission Directive (2003/87/EC), the EU established a national allocation arrangement for greenhouse gas emissions (carbon credits/emission allowances) and opened the way for trading in such through the EU Emission Trading System (EU ETS). 

For more information on regulations on the system for such trading, including auctioning of emission allowances, registration of allowances, etc., see the EEA memorandum base, which includes information about the Greenhouse Gas Emission Directive and amending regulations etc.

For more information about the EU ETS, the allowance registry and how to trade in emission allowances, see the Norwegian Environment Agency’s pages on emission allowances (in Norwegian only) and the European Commission's topic page ‘EU Emission Trading System (EU ETS)’.

Emission allowances and emission allowance market participants

After the introduction of MiFID II, emission allowances that meet the requirements of the Emission Allowance Directive (2003/87) are regarded as financial instruments and thus subject to the MiFID II rules. As emission allowances are classified as financial instruments, they are also subject to the MAR rules. According to MAR, trading in emission allowances and the parties acting in such market are subject to a number of obligations and prohibitions, including the prohibition against insider dealing, market manipulation and the disclosure of inside information.

MAR also sets out a number of obligations for a group of market participants called emission allowance market participants. Emission allowance market participants are defined in MAR Article 3 (1) point 20, cf. Article 17 (2), second subparagraph, cf. Commission Delegated Regulation (EU) 2016/522, Article 5. According to the definition, this includes:

• any person (natural or legal) who enters into transactions, including the placing of orders to trade, in emission allowances, auctioned products based thereon, or derivatives thereof, and
• engages in activities producing emissions exceeding one of the thresholds specified in Commission Delegated Regulation (EU) 2016/522, Article 5 (1): 
• the minimum threshold of carbon dioxide (CO2) equivalent is 6 million tonnes a year
• the minimum threshold of rated thermal input is 2 430 MW

The thresholds shall apply at group level and relate to all business, including aviation activities or installations, which the participant in the emission allowance market concerned, or its parent undertaking or related undertaking owns or controls or for the operational matters of which the participant concerned, or its parent undertaking or related undertaking is responsible, in whole or in part (Article 5 (2)).

For a more detailed description of how the definition should be understood, see ESMA's Q&A on MAR, items 11.1-11.3.

In its Q&A on MAR, ESMA states, among other things, that thresholds should be calculated per calendar year (1 January-31 December). If one of the thresholds is crossed, the undertaking concerned shall be deemed to be an emission allowance market participant as of 1 May of the following year (see item 11.11).

In its Q&A on MAR, ESMA also makes some clarifications related to the understanding of ‘parent undertaking’ and ‘related undertaking’ (see item 11.2). ESMA has also stated that market participants that enter into transactions/place orders to trade in emission allowances directly or indirectly fall within the definition (see item 11.3). Furthermore, it is stated that in a group structure (consisting of undertakings A and B) where a threshold has been exceeded at group level, both A and B will be regarded as an emission allowance market participant – even if individually they are below the thresholds set out in Article 5 (1) of the Regulations (item 11.3).

Obligations for emission allowance market participants  

MAR sets out several obligations for emission allowance market participants that, with certain adjustments, correspond to the obligations that apply to issuers. In this connection, reference is made to the definition of inside information relating to emission allowances, auctioned products based thereon and information relating to emission allowance market participants (see MAR Article 7 (1) (c), cf. (4) second subparagraph, etc.)

The obligations of emission allowance market participants include:

• Disclosure of inside information concerning emission allowances which they hold in respect of their business (Article 17 (2)). Alternatively, the participant may delay disclosure if the conditions in Article 17 (4) have been met, but shall then notify Finanstilsynet of this immediately after the information is disclosed (Article 17 (4) third subparagraph). See Disclosure of inside information and delayed disclosure of inside information and Written notification (KRT-1801) and explanation of delayed disclosure of inside information .
• Drawing up insider lists regarding inside information about emission allowances that arise in relation to the physical operations of that emission allowance market participant (Article 18 (8) (a)) and providing insider lists to Finanstilsynet upon request. See Information about insider lists.

Persons discharging managerial responsibilities in emission allowance market participants and persons closely associated with them shall notify Finanstilsynet and the emission allowance market participant of transactions conducted on their own account relating to emission allowances, to auction products based thereon or to derivatives relating thereto (MAR Article 19 (1)). Emission allowance market participants have an obligation to make these notifications public (Article 19 (3)).

Emission Allowance market participants also have an obligation to notify the person discharging managerial responsibilities of their obligations and draw up lists of persons discharging managerial responsibilities and persons closely associated with them (Article 19 (5)).

Emission allowance market participants are also subject to the rules on market soundings. See Information about market soundings (Norwegian text).