The Community Emissions
Trading Scheme (Allocation of Allowances) Scheme 2008
DEPARTMENT FOR
ENVIRONMENT, FOOD AND RURAL AFFAIRS News Release (Information
Bulletin ref :251/08) issued by The Government News Network on 29
July 2008
The Community
Emissions Trading Scheme (Allocation of Allowances) Scheme
("The Scheme") setting out the conduct and terms of
allocation of allowances in the UK's auctions in Phase II of
the EU ETS was published by HM Treasury today.
The Scheme sits below the Regulations governing auctions and sets
out the conduct and terms of allocation, along with the detailed
design of the auctions, and the requirements in order to participate.
Government aims to hold the first auction before the end of the
year with confirmation of the date at least two months in advance.
This version of the Scheme covers competitive bids only, which
must be placed through an intermediary. Government is aiming to
have the non-competitive element of the auction in place for early
2009. The Scheme sets out how to apply to become an intermediary
(Primary Participant) and the terms governing that appointment. A
full copy of the Scheme is available at: http://www.hm-treasury.gov.uk/consultations_and_legislation/community_emissions/consult_community_emissions.cfm
Notes to editors
1. The EU Emissions Trading System (EU ETS) aims to reduce
emissions of carbon dioxide at least cost to industry.
Participants are allocated emissions allowances that they can
trade to help them meet their emissions reductions targets.
2. The System works on a "cap and trade" basis. Member
States' 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). Anyone who is not
covered by the System will be able to open an account on the
Registry and buy and sell allowances.
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), and also the requirement to
surrender sufficient allowances the following year.
4. The UK NAP for the second trading period (2008-2012) sets
aside 7% of the allowance cap for auctioning, amounting to
approximately 85 million allowances over the phase. HMT has
appointed DEFRA as the person conducting the auction. DEFRA has
appointed the DMO to act as its agent. 5. The auctions are open to
anyone who holds an account on the Registry. The auctions will
comprise two bidding stages - i) non-competitive and ii)
competitive. The first auctions will involve competitive bidding
only. The Government aims to implement the non-competitive
bidding facility in time for the first compliance period of Phase II.
6. The Government will be appointing intermediaries (known as
Primary Participants) to facilitate the competitive stage of
auctions. Organisations will need to apply to Defra 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
supported by suitable credit ratings, 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.
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