DEPARTMENT OF ENERGY
AND CLIMATE CHANGE News Release (2008/013) issued by COI News
Distribution Service. 19 November 2008
The Government
today held Europe's first carbon allowance auction in Phase
II (2008 - 2012) of the EU Emissions Trading Scheme (EU ETS). Four
million allowances were sold at a total value of £54m excluding
VAT, or £13.60 per allowance, Euro/Sterling exchange rate 0.8428.
The EU ETS puts a cap on emissions from around 12,000
installations throughout the EU, including the energy and heavy
industrial sectors. These sectors are collectively responsible for
close to half of the EU's emissions of carbon dioxide.
Energy and Climate Change Minister of State, Mike O'Brien, said:
"Today's first Phase II auction demonstrates continued
UK leadership in reducing carbon emissions as part of the fight
against dangerous climate change. The EU ETS is central to keeping
the price of tackling climate change as low as possible to
industry and the economy.
We want more auctioning in the future - and are already planning
to auction 100% of the allowances needed by the power sector from
2013. This auction highlights the importance of using the market
to drive down emissions and create incentives for the development
of low carbon technology."
The Exchequer Secretary to the Treasury, Angela Eagle, said:
"Countries all around the world are dealing with the
challenge of a global economic slowdown, but today's auction
demonstrates that we will not be distracted from our fight against
climate change. Today, the UK has shown it is at the forefront of
environmental action by holding the first auction of carbon
allowances anywhere in Europe.
Based on the principle that the polluter pays, these auctions
will develop the market for carbon trading and provide the right
long-term incentives for companies across Europe to invest in
solutions to reduce emissions."
Auctioning reduces the potential for windfall profits and
strengthens incentives for companies to cut emissions. During 2009
the Government plans to auction 25 million allowances. Dates for
future auctions will be announced in due course.
Notes for 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. European Union Emissions Trading Scheme 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. The UK is
supporting an ambitious outcome on the EU 2020 climate and energy
package, particularly on levels of auctioning during the next
phase (2013 - 2020) when the Large Energy Producers (LEPs) will be
subject to 100% auctioning.
3. 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.
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 UK NAP can
be found at: http://www.defra.gov.uk/environment/climatechange/trading/eu/pdf/nap-phase2.pdf
5. Participants at today's auction placed bids through
intermediaries (Primary Participants) into a competitive bidding
facility using a bespoke Bloomberg auction platform. Subsequent
auctions will include a non-competitive component to facilitate
broader access to the auctions. The Government has approved four
Primary Participants to facilitate the competitive stage of the
auctions - Barclays Capital, JP Morgan, BNP Paribas and Morgan
Stanley. Organisations can apply to DECC to become Primary
Participants and will be assessed against the eligibility criteria
set out in the Scheme.
6. 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