Driving a green stimulus plan for Europe - Exchanges as anchor for markets in turmoil

    What has been the impact of COVID-19 on energy and environmental markets in Europe? How did markets and trading participants react? How can exchanges support a sustainable recovery? We have been busy answering these questions whilst working from home over the last few months, and produced a white paper outlining how a sensible sustainable recovery plan should look like:

    1. EU ETS. The EU ETS should form the backbone of the recovery phase as it provides one single carbon price across industries and level the playing field amid the current plethora of state aid initiatives.
    2. Grids, bidding zones and market-based flexibility. Upgrading the European energy transmission infrastructure and preserving large bidding zones will support economic recovery delivering transparency and long-term visibility to businesses and policymakers alike. Market-based flexibility solutions are also an essential tool to integrate renewables complementing infrastructure investments.
    3. Undistorted power prices. Power prices discovery mechanism should not be distorted (in the form of regulated prices, subsidies, etc.) as meaningful price signals are the key to further integrate renewable energies and unlock sector integration potentials.
    4. Natural and renewable gas. Fund should be directed towards enhancing the European gas infrastructure. Further, renewable gases will ensure security of supply in a renewables-driven energy system and strengthen Europe’s manufacturing base.
    5. Guarantees of origin. GOs serve to keep a check on how investments in green technologies are powering Europe’s economic recovery. Theyr should therefore be extended to cover more activities across Europe.
    6. Financial services legislation should support markets in facilitating climate action investments. Changes to insolvency provisions should not endanger market stability and further criteria should be implemented to ensure a future-proof counterparty risk management. The current MiFID II strict limits on market participants’ positions should be revised to liquidity supporting economic recovery.”