Allowance trading is the centrepiece of the US Environmental Protection Agency’s (EPA) acid rain programme. Allowances are the currency with which compliance with SO2 emission requirements is achieved. They authorise a unit within a utility or industrial source to emit one US ton of SO2 during a given year or any year thereafter.
Utilities that can use high-sulphur coal – which commands a lower price per British thermal unit than low-sulphur coals – can buy an SO2 allowance and bundle it with a high-sulphur coal purchase to produce more energy.
The Energy Risk Glossary, now in its eighth edition, provides an at-a-glance explanation of the myriad specialised terms and acronyms used in energy trading and risk management.
This year, the guide has been updated by Aviv Handler of ETR Advisory. Energy Risk would like to thank him for his input into this edition, which benefits greatly from his valuable experience and insight into energy markets.
The fast-changing nature of these markets means much has changed since our last edition – almost 200 new entries and revisions have been made this year. Reflecting the increasing importance of regulation, definitions of the Markets in Financial Instruments Directive (MiFid) and the Ljubljana-based Agency for the Cooperation of Energy Regulators (Acer) make it into the glossary for the first time. A focus on improving back-office infrastructure and mitigating counterparty risk is also apparent from the inclusion of terms such as ‘portfolio reconciliation’ and ‘portfolio compression’.
The glossary is extensively cross-referenced, making for easy and thorough searches. We hope you find it useful.
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