Warsaw, 6 June 2022 

 

Conclusions from the latest ZPP report monitoring the EU-ETS market – the participation of speculators in this market is underestimated

The European Union Emissions Trading System (EU-ETS) was launched in 2005 and was updated several times in subsequent years. The existence of this market was supposed to be an incentive for the Member States to choose more sustainable energy sources and decarbonise the European economy. As part of the Fit for 55 package, the European Commission has adopted a legislative proposal to revise the EU Emissions Trading System (ETS) with the intention of adapting it to meet the objective of a 55 % reduction in net greenhouse gas emissions in the EU by 2030 (compared to 1990 levels).

At the same time, the price dynamics for European Union Allowance (EUA) have increased significantly over the past few months. The price of emission allowances (EUA price) sold under the EU Emissions Trading System (ETS) has risen from under EUR 30 per metric tonne of coal in 2020 to over EUR 90 by the beginning of 2022.

The Union of Entrepreneurs and Employers has, over the past few quarters, systematically prepared and circulated among the organisation members a report aimed at a cyclical analysis of the specifics of transactions on the EU-ETS market, including in terms of speculator participation.

In March this year, the European Securities and Markets Authority (ESMA) – following numerous critical opinions regarding the speculative rising of EUA prices on the EU-ETS market – issued a report on the state of the carbon market in the European Union. According to the report: “The analysis has not identified any serious shortcomings in the functioning of the EU market for emission allowances, based on the available data. However, the market analysis conducted by ESMA has led to a number of recommendations to improve the transparency and monitoring of this market.“

And while the conclusions of the ESMA report are not satisfactory for those in favour of excluding speculators from the EU-ETS market, the authors themselves acknowledge that recently there is a growing interest in this market on the part of entities such as investment funds. Among other things, it was their speculative activities that have led to an intense increase in the price of this instrument over the past several months, which in turn has translated into a dramatic rise in energy prices.

The ZPP report entitled “EUA: PRICE BUBBLES AND THE COMPETITIVENESS OF POLAND AND THE EUROPEAN UNION” clearly shows that the EU-ETS market is subject to a very high risk of price bubbles. The microeconomic characteristics of the market for CO2 emission allowances have not changed during the past year. The same flaws and weaknesses that have been highlighted for a year are still present. However, it is worth noting the change in narrative that has taken place over the last few months. In the spring of 2021, the possibility of price bubbles forming on EUAs was mentioned by a few, and their voices were ignored by the energy mainstream. Today, the subject is regarded quite differently by the public opinion, with more and more experts noting that this phenomenon is now real.

The European Parliament is holding a debate on the possible exclusion of financial entities from the EU-ETS, which is supported directly by ZPP through Vice-President Marcin Nowacki’s involvement in the work of the European Economic and Social Committee (EESC).

The report is the last in a series of quarterly monitorings of the situation on the market for CO2 emission allowances. This is the fourth version of the document, distributed exclusively to ZPP members. The current edition includes updated econometric modelling for Q1 2022. In the conclusions, we additionally focused on how the formation of price bubbles influences the competitiveness of Poland and the EU. We will continue monitoring the topic and following market behaviour and regulations in this area. We therefore encourage you to stay in touch with us. If you are interested in the report or the issues it addresses, please send a message to biuro@zpp.net.pl.

 

Warsaw, 8 April 2020

 

The companies that decided to continue their operation in Russia have nothing to do with “the social responsibility of the business” And what does their fair CIT settlement in Poland look like?

REPORT OF THE UNION OF ENTREPRENEURS AND EMPLOYERS

 

The disgusting and unjustified Russian invasion of Ukraine has led to widespread ostracism and consumer boycotts. The broad scope of the sanctions meant that some companies had limited choice as far staying in Russia goes. Companies in the banking, energy or high-tech sectors have had to submit to decisions ordering to halt the trade immediately. The only companies that had a say in all of this were the ones of the retail and manufacturing sectors. Most of them have made this decision on their own – and in the eyes of the ZPP the only right decision there is – to leave this country. But not all of them.

ZPP has made a decision to look into the companies that have chosen to stay in Russia. Continuing our series of publications on how some multinational corporations go about their tax settlement, we have turned our attention to entities that have decided to continue doing business in the Russian Federation. In the course of the analysis it turned out that a significant number of these entities pay marginal income tax in Poland – in many cases, in relation to their revenues and the scale of their activity, multiple times lower than in Russia.

– Companies like to boast about their social responsibility, but the real value of these declarations is verified in moments of trial, when basic decency has to be demonstrated – says Jakub Bińkowski, member of the board and director of the Law and Legislation Department at ZPP.

– Maintaining the decision to continue operating in Russia feeds the aggressor’s budget and generates funds for the war-related activities. This is difficult to understand, all the more so since doing business in the country now involves gigantic risks and the purchasing power of Russian consumers is consistently decreasing. We are not particularly surprised that those who have decided to continue operating in this country, despite everything that’s happening, pay almost symbolic CIT in Poland. However, this is an additional reason why urgent reform of the tax system is necessary. Especially since the same entities pay much higher sums to the Russian budget – adds Jakub Bińkowski.

However, the information presented in the report is also a reminder of the extent to which companies remaining on the Russian market contribute to the country’s budget, also by paying corporate income tax. They are thus becoming sponsors of Vladimir Putin’s regime and, indirectly, of the ongoing war-related activities.

Leaving aside the current context, this phenomenon once again shows how inefficient the Polish tax system is, particularly in the area of tax paid by capital companies. We have repeatedly argued that CIT is de facto voluntary, as it is paid only by those entities that do not engage in tax optimisation.

Companies cited in the report include Makro Cash&Carry, Auchan, Astrazeneca Pharma, Decathlon, Leroy Merlin, but also Rockwool, Bonduelle, Total Polska (Totalenergies Group), Glaxosmithkline Pharmaceuticals and Schneider Electric. It turns out that these companies have not only decided to stay in Russia, but also systematically pay CIT at a fraction of a percent of revenue.

– We went a step further in our analysis and checked what the tax practice of the same companies looks like on the territory of the Russian Federation – says Kamila Sotomska, deputy director of the Law and Legislation Department of the ZPP.

– Logically, the same entities that do not pay CIT in Poland would not pay it in Russia in order to maximise global profit. Well, apparently not. Let’s take Leroy Merlin – in 2020 alone it paid almost three times as much tax in Russia as it did for nine years in Poland. Auchan paid five times more to the Russian budget in 2020 than to the Polish tax in 2012-2021 – she stresses.

More details in our report: How much CIT do companies that stayed in Russia pay in Poland?