HM TREASURY News
Release (PN 42/09) issued by COI News Distribution Service on
In line with the
government's commitment to support a robust and stable carbon
market, HM Treasury today published the Community Emission Trading
Scheme (Auctioning of Allowances) Scheme 2009. This replaces the
Community Emission Trading Scheme (Allocation of Allowances for
Payment) Scheme 2008. The Scheme sets out how the UK will conduct
auctions of carbon allowances and the terms governing
participation in auctions during Phase II of the EU Emissions
Trading Scheme.
The 2009 Scheme improves upon the UK auctioning model on two
significant grounds . The first key amendment implements a
previous government commitment to establish a non-competitive
bidding facility especially designed for smaller emitters. The
facility will allow businesses that participate in the EU ETS to
bid for up to 10,000 EU allowances (EUAs) at the clearing price
determined at auction. In due course the Government will announce
which auctions will include the non-competitive bidding facility.
The second amendment provides for the government to compensate
primary participants (auction intermediaries) for the services
they provide at auctions. Today, the government announces that
from the next auction on 4 June 2009, primary participants will
receive E0.05 for each carbon allowance purchased on behalf of an
indirect bidder. This performance related payment will help boost
auction competitiveness and ensure better value for money for UK
taxpayers. Indirect bidders will not bear any of these costs.
Approvals given and obligations entered into under the 2008
Scheme are not affected by its revocation and by the creation of
the 2009 Scheme. The 2009 Scheme also makes other minor amendments
to the 2008 Scheme. The full version of the 2009 Scheme is
available on HM Treasury's website at: http://www.hm-treasury.gov.uk/consult_community_emissionscheme.htm
Notes for Editors
1. European Union Emissions Trading System Phase II (2008-2012)
currently covers more than 10,000 installations in the energy and
heavy industrial sectors 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.
2. The System works on a "cap and trade" basis. EU
governments are required to set an emissions cap for all
installations covered by the System. Each installation is then
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).
http://www.defra.gov.uk/environment/climatechange/trading/eu/pdf/nap-phase2.pdf
3. If an installation fails to surrender sufficient allowances to
cover its annual emissions, it will face financial penalties
(currently set at E100 per tonne); the requirement to surrender
sufficient allowances to cover emissions still applies.
4. 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 Treasury
has appointed the Department of Energy and Climate Change (DECC)
to conduct the auction. DECC has appointed the UK Debt Management
Office (DMO) to act as the administrator
5. The UK auction model has been designed in two parts to offer
i) competitive bidding, and ii) non-competitive bidding. UK
auctions to date have used only the competitive bidding facility.
Competitive bidding works using intermediaries known as Primary
Participants, who collect and submit bids from end-users, referred
to as 'Indirect Bidders'. Subsequent auctions may
include a non-competitive element to facilitate direct access to
the auctions for smaller compliance buyers. During 2009 the
Government plans to auction 25 million allowances.
6. The Government has appointed six Primary Participants
(intemediaries) to facilitate the competitive stage of auctions.
Organisations can apply to DECC to become Primary Participants and
will be assessed against the eligibility criteria set out in the
Scheme. These include having an office in an EEA state, having the
ability to meet financial commitments, the ability to effectively
participate in an auction on behalf of others, and systems to
prevent the disclosure of confidential information (including
having 'Chinese walls' within their organisation).
7. Once appointed, Primary Participants must abide by the
"Terms" set out in the Scheme. These include accepting
instructions to act on behalf of any organisation with an EU
Registry account (known in this process as 'indirect
bidders'), subject to anti-money laundering checks and their
own objective checks on the indirect bidders' ability to pay
for allowances. This ensures that UK auctions are open to all and
that Primary Participants cannot refuse to place bids on behalf of
an indirect bidder without good reason.
8. The UK has held two auctions to date in Phase II of EU ETS -
on 19 November 2008 and 24 March 2009 - and published a schedule
of further auctions to April 2010. The schedule is available on
the UK Debt Management Office's website at: http://www.dmo.gov.uk/index.aspx?page=ETS/AuctionInfo
Non-media enquiries should be addressed to the Treasury
Correspondence and Enquiry Unit on 020 7270 4558 (e-mail to public.enquiries@hm-treasury.gov.uk).
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