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

3. The Operation of the EU ETS in Hungary
This chapter will present an overview of Hungarian participants and the positions of the various
sectors. In Hungary, most of the sectors and most companies possessed a surplus during the pilot
phase, and did not have to struggle to fulfill their obligations. This chapter will examine the
concentration of the market and the allocation of allowances among sectors and company groups.
Hungarian companies’ approach to the scheme will be presented through the author’s personal
discussions, with the conclusion that most obligated companies perceived the system essentially as
an administrative burden. Later, the effects of the scheme on Hungarian sectors will be examined,
with a special focus on its impact on motivating innovation, competitiveness and corporate
behavior. Transaction costs will be analyzed, as will effects on operative and investment decisions.
Lacking reliable preliminary data, it is difficult to quantify whether emissions reductions actually
occurred in Hungary during the pilot phase. The chapter will also offer a comparison of allocation
data with verified emissions quantities, and will show the surplus that Hungarian sectors possessed.
The final part of the chapter will examine the activity of the Hungarian carbon market, quantifying
Hungarian and international trade activity.
3.1. An Overview of the Hungarian EU ETS Market
The EU ETS market is a regulated one; its participants are obligated to enter into emissions trading
activities by the authorities, and do not necessarily join the market simply of their own volition. In
Hungary, only some one-third of all GHG emissions (32.73%, IDEACarbon, 2008) are covered by
the EU ETS market. Essentially, there is no separate Hungarian ETS market or Hungarian carbon-
dioxide market, since the trading of emissions allowances is not limited to within the borders of the
country: the EU ETS establishes a common market without borders, and the Hungarian segment is
an integral part of this marketplace.
This subchapter will review the Hungarian participants of the EU ETS, and will group them
according to size and sector. The EU ETS market in Hungary is rather concentrated, both in terms
of sectors and markets as well as installations. In general, Hungarian sectors tended to receive
more units than would have been necessary to cover their emission amounts during the pilot phase.
Fifty-two installations were facing a shortage, while 191 installations were long. The positions of
the various sectors will be discussed, and relative allocations will be compared. Overall, Hungarian
participants were able to rely on a surplus of 14%, which amounts to 12 Mt of CO2 emissions
allowances.
116