Department of Energy and Climate Change
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Date for next emissions trading system auction announced
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
