Energy | Working Paper
The financial side of energy markets in the low-carbon transition
18 July 2022
BY: HIEMSTRA Liebrich M.
This article will explain the characteristics of the financial side of energy markets. It aims to clarify why financial contracts are needed in the energy sector and how such transactions are conducted by energy companies. A specific focus in this article is the low-carbon transition. This focus is also reflected in the description of the different types of financial contracts discussed herein, including derivatives relating to cap-and-trade schemes for CO2 emissions and environmental, social and governance (ESG) financial products. In addition, this article addresses how these financial contracts in the energy sector are regulated and will pay attention to anti-manipulation rules in the European Union and the United States. The low-carbon transition and climate finance is taken as a guidance in discussing the topics above and pursues to shed light on the question how financial contracts in the energy sector may contribute to a low-carbon transition.
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