EU ETS - Carbon Allowances Market Disruption

What if someone decides to buy a very big amount of allowances targeting in their future resale at a very high price?
Would this disrupt the carbon allowances market?
Are there any regulating measures to avoid this?


Hello @Rosencratz

According to Auctioning Regulation Article 57, the maximum bid-size can be expressed as a percentage of the total number of auctioned allowances in any given auction or a percentage of the total number of auctioned allowances in any given year, whichever may be most appropriate to deal with the risk of market abuse.

Auctions will be conducted in a format where bidders submit their bids within a specific bidding window without knowledge of other bidders’ submissions. Successful bidders will pay the same auction clearing price for each allowance, regardless of their individual bid price.

An auction platform shall refuse to grant admission to bid in its auctions, revoke or suspend any admission to bid already granted, if it suspects market abuse in relation to an applicant, provided that such refusal, revocation or suspension is unlikely to frustrate efforts by the competent national authorities, to pursue or apprehend the perpetrators of such activities.

The EU ETS is a purely volume-based system with free price formation. However, to prevent the EUA prices for going sky high, within the system there is the possibility of an increase in the supply of allowances in the event of extreme price fluctuations.

If, for more than six consecutive months, the allowance price is more than three times the average price of allowances during the two preceding years on the European carbon market, the European Commission shall convene a meeting and be able to adopt measures such as bringing forward a part of the quantity to be auctioned or allow member states to auction up to 25% of the remaining allowances in the new entrants reserve.