The EU ETS as an Environmental Instrument - Green Energy and Efficiency: An Economic Perspective - page 363

As Ellerman et al. [ 5 ] point out: “ ( … ) Unseasonable temperatures have had an

effect on rst-period EUA pricing. During the winter of 2005/6 lower than average

temperatures increased energy demand and had a positive impact on EUA prices, as
did in higher than average temperatures during the winter of 2006/2007 resulted in a
lower energy demand than anticipated and contributed to the fall in the

rst period

price that was occurring at this time ” .

5.3 Market Participants

There are three main groups of participants in the EU ETS, grouped according to
their interests and characteristics:

nancial intermediaries, power utilities and other

operators.
The Financial Intermediaries group includes all companies that trade on the

emissions market but have no compliance obligations under the EU ETS. This
includes banks acting as market-makers providing liquidity to the market, brokers
acting as intermediaries in OTC transactions, investment funds, speculators etc.
Mainly during the second phase of the EU ETS, many banks and

'

nancial insti-
tutions were attracted by the emerging carbon market. However the collapse in
carbon prices and the instability in carbon policies in the EU have produced the
opposite effect, since it is now less widely perceived as pro

table. 12
Power utilities are very active in their carbon markets, since they usually hedge
the emissions from their future power sales, buying allowances on spot or futures
markets. In Phase II they receive no free allocations, as they transfer the full cost of
carbon to their customers.
The

category includes the rest of the compliance operators: oil
and gas, paper, cement and metal industries, airlines etc.
Their main concern is the potential loss of competitiveness with international
rivals which are not affected by the cost of their carbon emissions, as they are not
able to fully transfer their cost as they compete in globalised markets.

“ other operators ”

6 Main Conclusion

Almost 9 years have gone by since the launching of the EU ETS system as the
corner stone mechanism to achieve European Climate Change goals safeguarding
Energy Policies simultaneously.

12 According to a former head of carbon and coal at Barclays Plc, around half of the 30 brokers
that were present in the market have already left it or at least reduce their desks in the last 5 years.
In 2013 brokers share of the market was 10 %, all-time low and down from the 30 % registered in
2012, according to CME Group Inc.