The European Investment Bank (EIB) today announces its intention to select carbon exchanges and clearing banks for monetisation of 300 million EU Allowances (EUAs) from the New Entrants Reserve (NER) for phase 3 of the European Union Emissions Trading Scheme (EU ETS). The process will select exchanges, including examination of their ability to manage auctions, and banks acting as general clearing members of those exchanges. This leaves open a final decision on how and when carbon allowances will be monetised.
The EIB could seek direct clearing membership or access exchanges through general clearing members. Full details of the tender will be published by the end of July. A decision on which exchange will be used for NER300 sales and concerning possible clearing membership of selected exchange(s) by EIB is expected in the autumn. Access to carbon exchanges would enable the EIB to execute EUA futures as direct screen trades and to clear over the counter (OTC) EUA futures.
In parallel, the EIB has started discussions with a number of banks on legal requirements for OTC forward sales of EUAs. This will follow market-standards defined by the International Swaps and Derivatives Association. Eligible counterparts must agree to these requirements and be of acceptable credit quality to the EIB.
A final decision on the selling method and volumes is expected at the beginning of the fourth quarter of 2011. This will allow monetisation to start before the end of the year subject to the delivery of the 300 million EUAs to the EIB.
As previously stated, the EIB expects to receive the 300 million EUAs that are available for settlement following the formal adoption by the European Commission of amended EU ETS registry rules. Monetisation of the first 200 million EUAs must be completed within 10 months after the delivery to the EIB and start within one month of receipt of the EUAs.
For more details on monetisation, consult the questions and answers document on the EIB’s NER300 website (www.eib.org/ner300).