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EU Emissions Trading System: Volume of carbon allowances for the second UK auction and timetable for future auctions

DEPARTMENT OF ENERGY AND CLIMATE CHANGE News Release (Reference: 2009/021) issued by COI News Distribution Service. 23 February 2009

The UK government intends to auction Four million allowances in its second auction as part of the EU ETS on Tuesday 24 March 2009. In 2009 the UK plans to auction a total of 25 million allowances.

The auction on 24 March will comprise a competitive bidding facility only and the bidding window will be open between 8:00 and 10:00 GMT. The UK Government intends to charge VAT on all EU allowances auctioned in the UK.

The UK Government has also published a schedule of auction dates and volumes for subsequent auctions up to April 2010. The full schedule is available on the UK Debt Management Office's website at: http://www.dmo.gov.uk/index.aspx?page=ETS/AuctionInfo

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 Phase II auction in EU ETS allowances, selling four million EUAs at a total value of £54m excluding VAT.

The UK plans to implement a non-competitive bidding facility as part of the auction later in 2009 in order to give compliance buyers the option of accessing up to 10,000 EUAs at the clearing price of the auction.

3. European Union Emissions Trading System in 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 System. 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, JP Morgan, BNP Paribas and Morgan Stanley. Contact details for Primary Participants can be found on the DMO's website at: http://www.dmo.gov.uk/index.aspx?page=ETS/Approved

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

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