Dóra Fazekas Carbon Market Implications for new EU - UniCredit ...

field of environmental protection, which is financed by the installation when allowances are too
expensive. The literature suggests, however, that the more volatile allowance prices are, the later
the installation makes supplementary investments that are the higher the prices of allowances shall
be. (Nagy-György, 2005)
Assessment practice in Hungary roughly corresponds to that of the rest of Europe. In Hungary, the
most frequent pricing type is that based on preventive marginal cost. As opposed to other rights of
financial value, the value of the allowance is not determined by benefits and expected future
revenue arising from the possession of the allowance. In reality, it is only the relative market supply
and demand and their situation and volume that influence market prices of allowances. As a result,
the price of allowances has fallen under 1 EUR by the end of the first period, down from the
original unit price between 10 EUR and 15 EUR: Member States allocated too many allowances
and thus there is a surplus, with only few companies in scarcity wanting to purchase them.
Provision
A central feature of the allocation and trading of emissions allowances is that the operators shall
surrender allowances for the quantity emitted in the current year by April 30 of the following year.
Thus the operator is obliged to make provisions under the Law on Accounting: “provisions shall be
formed to the debit of pre-tax profit or loss – to the extent necessary – to cover payment liabilities
toward third persons which originate from past and current transactions and contracts and which are
likely or sure to be incurred by the balance sheet date, however the amounts of such liabilities are
not established by the balance sheet preparation date and the company has not provided the required
cover for such in any other form”. (Law on Accounting, Section 41, Paragraph 1). According to
Law XV of 2005, Section 5, Paragraph 1, “the operator shall follow up the emission of greenhouse
gases falling under the emissions allowance according to special legislation and submit an audited
report for the environmental protection authority relating thereto by March 31 of the following
year.” The fact that actual figures might be evident only after the balance sheet date is not contrary
to the applicability of the provision, since “during the formation of a provision, liabilities that exist
on the balance sheet date and the estimated expenses shall or may be taken into account even if they
become known between the balance sheet date and the date of closing” (Law on Accounting,
Section 41, Paragraph 9).
As a result, the operator should determine the quantity of allowances to be surrendered with regard
to the balance sheet date, which corresponds to the emissions in the current year, and then it should
deduct the quantity, which is covered by the delayed revenue indicated on the liabilities. (This is the
remaining quantity of allowances allocated for free by the state at the end of the year.) The
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