The Buy and Hold Approach to Voluntary EUA Deletion

The concept of "buy and hold" is well-established in financial markets, where investors purchase assets with the intention of holding them long-term to benefit from appreciation and compound returns. In the context of voluntary EU Emission Allowance (EUA) deletion, this approach takes on a unique dimension: strategic purchasing followed by permanent removal from circulation to create lasting climate impact.

Understanding the Buy and Hold Strategy

In traditional buy and hold investing, the goal is wealth accumulation through asset appreciation. In voluntary EUA deletion, the objective is climate impact maximization through systematic market intervention. The approach involves:

1. Strategic acquisition: Purchasing EUAs during optimal market conditions
2. Permanent deletion: Removing allowances from circulation forever
3. Market constraint: Reducing the total supply available to polluting industries
4. Price pressure: Contributing to higher carbon prices that drive decarbonization

Unlike financial investments, the "return" on EUA deletion is measured in tonnes of CO₂ prevented and the broader economic incentives created for emission reductions across the EU economy.

The Compounding Effect of Permanent Deletion

Traditional buy and hold investing benefits from compound returns, where gains generate additional gains over time. EUA deletion creates a similar compounding climate effect:

Should the EUAs be Deleted Immediately?

Short answer: Any offsetting strategy should optimize timing to ensure full emission reduction. When you purchase offsets through Minpact, we buy and hold EUAs until the most impactful moment, aligning with market dynamics and regulatory requirements.

The Immediate Cancellation Problem

If we would cancel EUAs while the TNAC (Total Number of Allowances in Circulation) is high, the EU Market Stability Reserve will automatically respond by withholding allowances from auction in the next cycle. This means a portion of the offsetting action is negated by the MSR's automatic adjustment, reducing its climate impact.

Minpact's Strategy: Timed Buy and Hold

When Minpact instead buys and holds the EUAs (does not surrender or cancel them) until the timing is right, those allowances are effectively removed from circulation and are not counted in the TNAC. This reduces the TNAC directly, and the MSR continues to withdraw allowances based on the remaining surplus.

As the TNAC shrinks, the MSR's withdrawals stop. At this point, cancelling the EUAs has a direct and full impact on the cap, ensuring that each cancelled EUA represents a full emission reduction.

The Network Effect

As more organizations adopt the buy and hold approach to EUA deletion, the collective impact creates a powerful network effect. Each additional participant:

• Amplifies the market constraint created by all participants
• Demonstrates growing voluntary demand for climate action
• Provides social proof for other organizations considering similar actions
• Creates political momentum for more ambitious climate policies

This network effect means that early adopters of voluntary EUA deletion are not just creating direct climate impact, but also catalyzing broader market transformation.

The Future of Voluntary EUA Deletion

As carbon markets evolve and climate urgency increases, the buy and hold approach to voluntary EUA deletion is likely to become an increasingly important tool for serious climate action. The combination of immediate impact, regulatory certainty, and long-term market transformation makes it uniquely suited for organizations seeking maximum climate effectiveness.

The growing recognition of EUA deletion's advantages suggests that this approach will continue to attract organizations looking for credible, verifiable climate action that goes beyond traditional offsetting approaches.