DEPARTMENT OF ENERGY
AND CLIMATE CHANGE News Release (2009/005) issued by COI News
Distribution Service. 21 January 2009
The UK Government
intends to hold its second auction in Phase II of the European
Union's Emissions Trading System on 24th March 2009.
The auction will comprise a competitive bidding facility only.
The bidding window will open from 8am and close at 10am on 24th
March 2009.
The EU ETS sets a cap on the total emissions from the main
industrial sectors across Europe, covering more than 10,000
installations in the energy and industrial sectors. Each
installation has to purchase allowances for every tonne of carbon
they emit.
Auctioning these allowances marks an important step forward in
developing a system where market forces create financial
incentives for major carbon emitters to reduce their emissions.
This will help stimulate the development of green technology and
British business can begin to realise the benefits of being
leaders of the low carbon revolution.
The number of allowances
to be auctioned will be announced at least one month before the
date of the auction. In 2009 the UK plans to auction a total of
25 million allowances.
Participants in the auction can place bids through
intermediaries, called Primary Participants The application window
for organisations to become Primary Participants has also
re-opened and is expected to remain open for the remainder of
Phase II.
Application forms to become a Primary Participant and any
supporting documentation should be received by The Department of
Energy and Climate Change at least one calendar month before any
auction date for an institution to be permitted to participate
directly in that auction (i.e. by 24 February 2009 for Primary
Participant status to be effective for the 24 March auction). This
allows sufficient time for the Department to process and assess
the application and still leave a period of time for the Primary
Participant to establish relationships with indirect bidders.
The UK Government will charge VAT on EU allowances auctioned in
the UK.
Notes to editors
1. The Treasury has appointed the Department of Energy and
Climate Change (DECC) to conduct the auctions and DECC has
appointed the UK Debt Management Office (DMO) to act as the
official agent running EU ETS auctions.
2. On the 19th November 2008 the UK successfully held the first
ever auction of EU ETS credits. Four million allowances were sold
at a total value of £54 million excluding VAT.
3. European Union Emissions Trading System Phase II (2008-2012)
currently covers around 12,000 installations including large
energy generators, cement manufacturers and chemical plants. These
sectors are collectively responsible for close to half of the
EU's emissions of carbon dioxide. The EU ETS aims to reduce
emissions of carbon dioxide at least cost to industry.
4. The EU ETS works on a "cap and trade" basis. EU
governments are required to set an emissions cap for all
installations covered by the Scheme. Each installation will then
be allocated allowances for the particular commitment period in
question. The number of allowances allocated to each installation
for any given period is specified in a document called the
National Allocation Plan (NAP). If an installation fails to
surrender sufficient allowances to cover its annual emissions, it
will face financial penalties (currently set at 100 Euros per
tonne); the requirement to surrender sufficient allowances to
cover emissions still applies.
5. The UK NAP for the second trading period (2008-2012) sets
aside 7% of the allowance cap for auctioning, amounting to
approximately 86 million allowances over the Phase. The UK NAP can
be found at: http://www.defra.gov.uk/environment/climatechange/trading/eu/pdf/nap-phase2.pdf
6. The Government has already approved four Primary Participants
to facilitate the competitive stage of the auctions - Barclays
Capital, BNP Paribas, JP Morgan Securities Ltd and Morgan Stanley
& Co International plc.
7. Further details about EU ETS are available on the Department
of Energy and Climate Change website: http://www.defra.gov.uk/environment/climatechange/trading/eu/index.htm
and on the DMO's website at http://www.dmo.gov.uk