Marex closes its first EUA Carbon REPO trade.June 16, 2022
Marex is pleased to announce the execution of its first physically settled European Union Allowance (EUA) Repurchase Agreement (REPO) trade on Carbon with a European industrial client.
Marex buys spot EUA certificates from corporates who receive cash up front and simultaneously enter a forward agreement to repurchase EUAs at the end of the agreed period.
The transaction was structured by Marex’s hedging and investment solutions arm, Marex Solutions. The trade was developed to help a client monetise existing EUA inventories, providing a valuable injection of working capital in exchange for assets held on their balance sheet.
Corporates sitting on unused long carbon certificates – with no immediate need to use them – due to the free allocation or over-purchase over the last couple of years with Covid, lower production and therefore lower carbon footprints, can sell these certificates or agree to repurchase these in the future.
Corporates participating in the EU Emissions Trading System (ETS) scheme generally receive a free allocation of EUAs from the regulator each year and are then required to top this up to match the full amount of carbon that they emit during each compliance period.
David Cohen, head of Hedging Solutions at Marex Solutions, commented: “This significant EUA REPO transaction executed in EMEA is the latest milestone in the development of our Marex Hedging Solutions business and a good example of the team’s innovation. There is certainly more to come. We are delighted to play our part in affirming Marex’s commitment to broadening the firm’s renewable offerings and capabilities ”.
Corporates participating in the EU Emissions Trading System (ETS) scheme generally receive a free allocation of EUAs from the regulator each year and are then required to top this up to match the full amount of carbon that they emit during each compliance period. Corporates enter a forward agreement to repurchase EUAs in the future and to then submit these to the registry at the end of the agreed period.