28 Pages Posted: 6 Mar 2011
Date Written: March 5, 2011
This study examines the financial risks posed by energy and environmental markets and how these risks are addressed by current regulatory regimes and legislation. This is undertaken using a legislative analysis of the financial regulation of energy and environmental markets, drawing on ‘grey’ literatures to appraise current policy. Initially, it is reported that the movement towards a unified European energy and environmental markets is expected to continue. Second the European Union (hereafter EU) will play an increasingly important role in the financial regulation of energy and environmental markets through bodies such as ACER and ESMA. Third, the new regulatory regime will mean more trading of energy and carbon derivatives will occur on exchanges. Fourth, where feasible there appears to be a movement towards common regulation of both spot and derivative instruments for some (e.g. within carbon and maybe electricity markets), yet not all markets. Lastly, regulation of these markets remains in a state of flux and it is essential the boundaries of regulatory responsibility between energy and financial regulators are assessed to ensure activities leading to risk do not fall between the remits of responsibility.
Keywords: Crises, Financial Regulation, Europe, Energy Markets, Carbon Finance
JEL Classification: G01, Q02, G18, G28, G38
Suggested Citation: Suggested Citation
Diaz-Rainey, Ivan and Siems, Mathias M. and Ashton, john Kevin, The Financial Regulation of European Wholesale Energy and Environmental Markets (March 5, 2011). USAEE Working Paper No. 11-070. Available at SSRN: https://ssrn.com/abstract=1778429 or http://dx.doi.org/10.2139/ssrn.1778429
By Robert Rosen