EU braced for CO2 cap volatility

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The EU Greenhouse Gas Emission Trading Scheme (EU ETS), which came into effect at the beginning of 2005, will see companies issued with a fixed amount of ‘trading allowances’, which will cap the amount of C02 emissions they can make. Around 15,000 entities across the EU will have to comply with the new regulations.

‘Companies exceeding their quota will be penalised, but businesses which do not use up their quota will be able to sell unused allowances,’ said Robert Casamento, senior manager of energy markets at Deloitte.

Casamento said it was too early to say how companies would be affected.

Richard Gledhill, head of climate-change services at PwC, explained that the trading allowances had created billions of pounds worth of new assets and liabilities, which companies would have to reflect in their financial reports.

‘This has created new business opportunities for audit firms, which will have to provide assurance and advice on the tax implications of the ETS,’ he said.

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