School of Management and Law EU Emissions Trading: The Role of Banks and Other Financial Actors Insights from the EU Transaction Log and Interviews SML Working Paper No. 12 Johanna Cludius, Regina Betz ZHAW School of Management and Law St.-Georgen-Platz 2 P.O. Box 8401 Winterthur Switzerland Department of Business Law www.zhaw.ch/abl Author/Contact Johanna Cludius
[email protected] Regina Betz
[email protected] March 2016 ISSN 2296-5025 Copyright © 2016 Department of Business Law, ZHAW School of Management and Law All rights reserved. Nothing from this publication may be reproduced, stored in computerized systems, or published in any form or in any manner, including electronic, mechanical, reprographic, or photographic, without prior written permission from the publisher. 3 Abstract This paper is an empirical investigation of the role of the financial sector in the EU Emissions Trading Scheme (EU ETS). This topic is of particular interest because non-regulated entities are likely to have played an important part in increasing the efficiency of the EU ETS by reducing trading transaction costs and providing other services. Due to various reasons (new rules and regulations, reduced return prospects, VAT fraud investigations) banks have reduced their engagement in EU Emissions Trading and it is unclear how this will impact on the functioning of the carbon market. Our regression analysis based on data from the EU Transaction Log shows that large companies and companies with extensive trading experience are more likely to interact with the financial sector, which is why we expect banks’ pulling out of the EU ETS to affect larger companies more significantly.