E.U. Emissions Trading Scheme/Allowances Working Group

The FMLC resolved to establish a Working Group to consider issues of legal uncertainty relating to the E.U. Emissions Trading Scheme (“E.U. ETS”) and the European emissions allowances (“EUAs”) in the context of Brexit. Currently, companies buy and sell EUAs as needed through accounts which can be opened on a E.U.-wide Registry, run by the European Commission. A significant proportion of trading in EUAs is carried out by way of derivatives, which are subject to E.U. financial markets regulation.

It is expected that, as a result of Brexit, the U.K. will no longer be able to participate in the E.U. ETS, which raises issues concerning: (i) the status of current U.K. emissions account holders; (ii) the use of EUAs as securities by installations during the transitional period before and after Brexit; and (iii) the legal nature of U.K. emissions allowances should a separate U.K.-only emissions scheme be established.