Thomson Reuters Carbon Market Community featured Akin Gump’s Ken Markowitz and Jessica Davies article “Property Rights Conveyed by Emission Allowances: An Analysis” this week.  The article is available on Thomson Reuters website and requires free registration.

This analysis explores the legal nature of the rights that attach to emissions allowances and considers whether those rights are more appropriately classified as private or public. Uncertainty has arisen over this issue because legislators seem to have either largely failed or avoided to define explicitly the inherent property rights that attach to allowances when drafting laws governing the major emissions markets operating today, particularly in the EU ETS.

An understanding of the nature of these rights is critical to enable accurate valuation and to foster stable linkages among the global carbon markets. By examining the emissions allowances in the key carbon schemes against rights that are generally understood to attach to property, the authors conclude that emissions allowances confer what can be more accurately described as a “regulatory right.” This “regulatory right” exhibits aspects of both public and private property law, but more importantly must be placed in the context of the underlying national laws. Finally, the authors conclude that identifying the package of rights, rather than relying on semantics, is what is important to encourage this certainty.

For further information about this topic, please contact Akin Gump.