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

The EU ETS was an obligation for Hungary when joining the EU. The GOH considered it as a tool
for economic development rather than a system necessary to reach environmental objectives. A lack
of coordination during the allocation process between the Ministries of Environment, Economy and
Finance has been highlighted.
The effects of the EU ETS on Hungarian participants may be divided into two categories. It is
necessary to distinguish between the effects of the scheme on the Hungarian state and on affected
companies. The state had to consider a set of strategic issues related to the introduction and
operation of the scheme, on the one hand. On the other hand, it also had to establish the institutional
framework of the system, and ensure the utilization of auction revenues and the enforcement of
sanctions. At the same time, the system posed administrative burdens for affected companies. For
Hungarian companies, the most important goal was compliance and meeting the requirements of the
scheme. The impact of the three-year pilot phase on companies in Hungary was mostly marginal,
nevertheless in the long run the cost of carbon emission needs to be taken into account for
investment decisions.
Hungarian companies considered the pilot phase of the European Unions Emissions Trading
Scheme to be an administrative burden. The majority of the companies viewed emissions
allowances as administrative units, and not as financial assets. For companies participating in the
scheme to realize the opportunity costs of allowances, it would be necessary to increase the share
of allowances allocated for a cost. The survey pointed out that companies where allowances were
managed centrally and were traded on the corporate level, tended to be more efficient. Dealing with
EU ETS issues is a rather complex process, which requires harmonized efforts of several
responsibles - the coordination of different organizational units is critical to the success of the
scheme.
Uncertainty surrounding new legal regulations made it difficult to adopt the system in Hungary.
The EU ETS appeared to be unpredictable: regulations were still being put in place during the pilot
phase itself, and decision-making on the EU level was not coordinated. Member States did not
observe deadlines. At the same time, a pilot phase, which was far shorter, to begin with, than the
timeframe necessary for implementing new economic decisions, did not aid the pricing of carbon
emissions in business decision-making. The ability to plan ahead for the long term is vital for the
scheme to succeed. It is important for companies to know that the effects of current investments
aimed at reducing emissions will bear fruit in the long term.
Hungarian companies – due to more plentiful allocations than may have been necessary – were able
to realize significant profits in the short term. The long term, however, is a different situation;
186