Further to WQ86480, will the Welsh Government confirm what proportion of UK emissions trading system allowances being hedged are held by industrial emitters, financial institutions and the UK emissions trading system authority?
Hedging is a practice undertaken by compliance entities like the industrial emitters rather than non-compliance entities such as financial institutions or the UK ETS Authority. Hedging helps reduce the risk of carbon price movements, thereby protecting the profitability of their industrial activity. Non-compliance entities, such as financial institutions, with relevant permissions can participate in UK ETS auctions and trade on the secondary market. These activities can provide useful liquidity and help market function. Information on the proportions of allowances retained among market participants is not available to the UK ETS Authority due to the nature of the secondary market activity.