ESMA report highlights financial firms' central role in EU carbon markets

ESMA's third annual EU carbon markets report finds financial intermediaries provide critical liquidity and counterparty services to compliance entities.

ESMA confirms financial firms are structurally important to EU ETS functioning through liquidity provision and risk management for non-financial compliance entities. This heightens supervisory focus on conduct, market abuse, and prudential treatment of carbon exposures.

Signals continued regulatory scrutiny of carbon market intermediation, market abuse risks, and prudential treatment of emissions allowances.

Reinforces supervisory attention on financial firms' role in carbon markets and potential expansion of oversight.

“ESMA's third annual market report on EU carbon markets shows financial intermediaries are central to functioning: providing liquidity, acting as counterparties to non-financial firms, and helping compliance entities access allowances and manage price risk.”