On February 15, ISDA co-signed a letter with nine other trade associations on the importance of protecting the EU emissions trading system (ETS) from damaging interventions either through position limits or some other action, ahead of the publication of the European Securities and Markets Authority’s (ESMA) final report on the EU carbon market.

The letter expresses concern about the possibility of such an initiative and the unintended consequences that could result. It comes on the back of the recent spike in energy and carbon prices, which has given rise to calls from several member states to crack down on speculation in the EU carbon markets. The letter points to recent evidence from the European Commission that there is no indication the ETS’s long-term price trajectory reflects anything more than market fundamentals. It is reinforced by a report published yesterday by Oxera, which concludes that the ETS is functioning well, not deviating from market fundamentals and producing outcomes consistent with EU climate policy objectives.