Guarantees of Origin: is an electronic marketplace possible?

Stefano AlaimoChair of the WG on Environmental Markets

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Market price for GOs

Big question:which is a reliable market

price for a GO?

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Organized markets

• One of the scopes of an organized market is to gather interests on few instruments in a safe environment, in order to “produce” an economically efficient price

• Main features of an organized market are: security liquidity transparency

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Organized markets

The creation of a “mature market” is a very long process

Some basic requirements are needed to create “confidence” in the market’s operators

The more confidence is reached, the more liquidity will be attracted

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LiquidityTo achieve a good liquidity in a market, it would be better:

• to have only one instrument tradedIt should be important that GOs implementation will be based on one stable standard i.e. the European Energy Certificate System (EECS), as suggested by RE DISS project

• to create demandVoluntary demand is not enough. Member States should introduce mandatory schemes for fuel mix disclosure based on GOs (other tracking system possibly coordinated and converted to GOs)

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Security

To create confidence in an organized GOs spot market, it is needed:

• a reliable guarantee system - market operator acting as Central Counterparty (payments and spot delivery are guaranteed)

• links between Registries (Hub) to avoid double selling and double counting (comparable to the Registry regulation for EU ETS)

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Transparency

Trading on a organized market might provide transparency - prices disclosure and provide also economic signals to operators and institutions

An efficient and reliable market price could be also used as benchmark for bilateral contracts and for forward contracts

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Conclusion

Potential for GOs organized market:

A liquid, safe and transparent GOs spot market could lead to a wider use of GOs in Europe. Social welfare and investments could benefit

Threats:

It is needed to avoid green-washing, VAT carousel, double counting, hacking of the systems (see ET ETS experience…)

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Contacts

EUROPEXassociation of european energy exchanges

Rue Montoyer 31 Bte 91000 Brussels - Belgium Phone. +32 2 512 34 10

www.europex.org

secretariat@europex.org