EU carbon emission allowances as environmental and financial instruments – is it possible to kill two birds with one stone?

In this paper, the consequences of recognition of carbon emission allowances as financial instruments under the European Union's (EU) financial markets law including Directive 2014/65/EU of 15 May 2014 on markets in financial instruments (MiFID II) and the EU environmental law are analysed. We try to answer the question in what way the recognition of carbon emission allowances as financial instruments affected the functioning of the European Union Emission Trading Scheme (EU ETS). In particular, we ask whether it is beneficial or detrimental in terms of the environmental and economic effectiveness of the EU ETS.