Trading in emission allowances and credits

In order to trade allowances or credits you need to have an account in the EU ETS Registry or the Danish Emission Trading Registry. Here you can read about how to trade allowances and credits, and what you need to be aware of if you are trading allowances in UK.

Every holder of an account in the EU ETS Registry may trade with CO2 emission allowances and credits. Every holder of an account in the Danish Emission Trading Registry may trade with emission reduction units (ERUs) and carbon credits (e.g. CERs, AAUs and RMUs). The Danish Emission Trading Registry does not accept trading in the types of carbon credits known as long-term certified emission reductions (lCER) or temporary certified emission reductions (tCER).

There are no limits to the volume of a transaction, but you are not permitted to transfer more emission allowances or credits than are held in your account. No service charges are linked to the individual transactions, but an annual service charge for each account is payable to the Danish Business Authority.

Account holders must enter into their own agreements concerning price; allowance/credit volume; transaction date, etc., with the party with whom they wish to trade. Financial transactions relating to the purchase and sale of emission allowances and credits are to take place outside the registries and do not have to be notified to the Danish Business Authority. In this context, the sole purpose of the registries is to register ownership of the emission allowances or credits.

In practice, the account holders have various options for trading in allowances:

  • an account holder may trade directly with another account holder;
  • an account holder may buy and sell emission allowances and credits through an exchange. Exchange trading can be advantageous if large volumes of emission allowances are to be bought or sold, or if an account holder do not wish to enter into a direct transaction with other account holders;
  • an account holder can also choose to use a broker/intermediary who also has an account in the EU ETS Registry or a national emission trading registry. The broker/intermediary may do business on behalf of the account holder and manage the practical aspects of emission allowance or credit transactions.
BREXIT 30/3 2019

Trading CO2 allowances with UK companies

Brexit may affect your business if you have agreements on future purchases or sales of CO2 emission allowances with companies in the UK.

The EU and UK are still negotiating an agreement for UK's withdrawal of the EU. If the UK resigns from EU by March 2019 without an agreement to continue in the EU Emission Trading System, the EU-rules regarding emission trading will no longer apply to companies in the UK. If that happens it will no longer be possible to transfer EU allowances between accounts in the UK and the rest of the EU. In addition to this, the EU will put a country code on emission allowances issued to companies in the UK between January 1, 2019 and the UK exit. If emission allowances issued after January 1, 2019 to companies in the UK will be earmarked with a country code, the allowances cannot be used by Danish companies to comply with their climate commitments.

Please note that CO2 emission allowances issued to companies in UK before January 1, 2019 can be used by Danish companies to comply with their climate commitments given that the transactions of allowances have been carried out and the allowances therefore no longer are held in the accounts in UK before Brexit.

It is therefore recommended that your company is aware of contracts or agreements on future delivery of emission allowances that may be subject to change due to Brexit. If you buy allowances after January 1, 2019, you should be aware that they are not earmarked with a country code.

You can read about the change of the EU’s Registry Regulation in view of the UK's withdrawal of the EU Emission Trading System on EUR Lex.