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

2.1. The Institutional Background of the EU ETS in Hungary
It is especially important to analyze the institutional background of emissions trading, as the
international literature has raised concerns about this vis-à-vis Eastern European Member States
(Skjærseth and Wettestad, 2007, p. 264). It is important that the institutional environment establish
clear and transparent conditions for the strategy developed for coping with climate change. Hungary
established its institutional capacity for processing the purchase of emissions allowances following
the introduction of the emissions trading system: relevant authorities were established, as were the
transaction registry and monitoring systems. The operation of the EU ETS requires a clear
institutional and regulatory infrastructure. Political and technical expertise is also essential for the
introduction of the system and for its successful operation.
The EU ETS is regulated concurrently on two levels: centrally by the European Commission, and at
the Member State level, where several authorities are responsible for the implementation and
development of the scheme. In the Commission, a Central Administrator maintains the transaction
log, automatically checking and recording the transactions of allowances. The pilot phase required
the establishment of the following national institutions:
• Competent Authority: responsible for implementing the scheme on a national level. It
annually issues permits and distributes a proportion of the total amount of allowances. It is
responsible for monitoring the procedure, reporting to the European Commission every year and
presenting the transaction log. It supervises monitoring procedures, inspects installations’
reporting and the surrendering or cancellation of allowances, and levies fines for substandard
performance. In Hungary, two authorities are responsible for these tasks: the Climate Change
and Energy Unit of the Ministry of Environment and Water determines the amounts to be
allocated; and the National Inspectorate for Environment, Nature and Water issues the
emissions permits and maintains the Hungarian emissions registry.
• Verifier: an independent committee, which verifies whether the scheme is implemented
correctly. This committee inspects the reports of the companies, to determine whether they are
in accordance with the requirements set by the Commission. The verification body requires that
(1) the reported data be free of inconsistencies, (2) the collection of data follows scientific
standards and that (3) the relevant records of the installation are complete and consistent. It is
rather interesting to examine verification more closely, as a regulatory task has never been
outsourced before in environmental policy.
• Registry: ensures “accurate accounting of the issue, holding, transfer and cancellation of
allowances” (EU Directive, Article 19). The registries are, essentially, standardized electronic
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