Allocating Carbon Allowance Invoice to Companies Based on Settlement and Match Types

In IMOS, we provide 3 ways of settling the emission expenses between two parties. This includes Cash settlements, Allowance settlements and a hybrid of both.

This settlement functionality is available in the following contracts:

• Time Charter In/Out (with CFGEnableTCEmissionsAllocation enabled)

• Cargo, Cargo COA and VC In (with CFGEnableVCCOAEmissionsAllocation enabled)

Refer to the following screenshot for an example.

For more details on the settlement workflow, please reference https://help.veson.com/imos/emissions-expense-settlement-workflow

The allocated counterparty may vary depending on the settlement type and the match type configuration. Please review the following section for an overview of the outcomes based on the settings or settlement utilized.

Cash Settlement

For Cash Settlement, the allocated counterparty in the invoice is the contract company (Cargo or Time Charter or Charterer)

Allowance Settlement

For Allowance Settlement Type, the allocated counterparty in both the Allowance invoice and Allowance Transfer is the contract company (Cargo, Time Charter, or Charterer). The "Match Type" dropdown (N/A, COMPANY, STRATEGY, or COMPANY+STRATEGY) serves as a filter to help users narrow down the options and select the appropriate carbon trade for Allowance Transfer.

Emissions Allowance Invoice and Allowance Transfer: Financial Implications

Both Emissions Allowance Invoice and Allowance Transfer processes impact a company's financial accounts:

1. Emissions Allowance Invoice:

   1. Expense Account: The invoice amount is added to the contract company's expense account, reflecting the cost associated with the emissions allowance.

   2. Liability Account: A decrease in liability occurs as the invoice is processed, indicating that the company has met its emissions allowance obligations.

2. Emissions Allowance Transfer:

   1. Liability Account: An increase in liability is recorded, representing the transfer of emissions allowance obligations from one counterparty to another.

   2. Asset Account: A decrease in assets takes place, indicating the utilization of emissions allowances from the contract company (Cargo, Time Charter, or Charterer) by the counterparty (trade company) participating in the transfer.

Workflow Summary

The table below summarizes the workflow for Allowance Invoice creation to Allowance Transfer generation in Time Charter Contracts (applicable to Cargo, Time Charter, or Charterer) based on different "Match Type”: N/A, COMPANY, STRATEGY, or COMPANY+STRATEGY.

S/N	Steps	Match Type
		N/A	COMPANY	STRATEGY		COMPANY+STRATEGY
		All allowances with available quantities will be shown in the dropdown	Allowances that have available quantity and also have a company code that matches the company code on the current contract	Allowances that have available quantity and also have a trade strategy that matches the company code on the current contract. If there is no strategy on the contract, then only those Carbon Allowances with no strategy will be displayed		Match on both company code and strategy values
1	Create an Allowance Invoice on the contract
2	Posting Emissions Allowance Invoices Invoice Posted: Expense Account: The invoice amount is added to the contract company's expense account. Liability: A decrease in liability occurs, indicating the fulfilment of emissions allowance obligations by the contract company.
3	Create Carbon Allowance Trades; Set the status to confirmed This will allow a list to be generated in the Allowance ID dropdown list Counterparty: Seller/Buyer of Carbon trade, in this context, it is the seller as Company purchases Clearinghouse: A neutral third party, ensuring the financial obligations of the carbon trade are met by both the buyer and seller.	Match Type
		N/A	COMPANY	STRATEGY		COMPANY+STRATEGY
				STRATEGY = Nil	STRATEGY = EUA ETS	COMPANY+STRATEGY = TRADER+ EUA ETS
4.1	To check for Strategy; Strategy for the contract under "Exposure“ tab	"Exposure“ = Nil			"Exposure“ = "EUA ETS“
4.2	Create allowance Transfer
4.3	Dropdown list for allowance trade as per "Match Type“	"Exposure“ = Nil Match Type: "N/A“	"Exposure“ = Nil Match Type = "COMPANY“	"Exposure“ = Nil Match Type = "STRATEGY “	"Exposure“ = "EUA ETS“ Match Type: "STRATEGY “	"Exposure“ = "EUA ETS“ Match Type: COMPANY+STRATEGY = TRADER+ EUA ETS
5	Posting Emissions Allowance Transfers Posted Allowance Transfer: Liability: An increase in liability occurs, representing the transfer of emissions allowance obligations. Asset: A decrease in assets takes place due to the allocation of emissions allowances under the contract company (Cargo, Time Charter, or Charterer) from the counterparty involved in the transfer.