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EU ETS Phase i - New entrant reserve

DEPARTMENT FOR ENVIRONMENT, FOOD AND RURAL AFFAIRS News Release (Information Bulletin ref:114/08) issued by The Government News Network on 25 April 2008

Information Bulletin

The UK has confirmed that it will cancel the remaining allowances in the Phase I New Entrant Reserve. The total number of allowances remaining after all applications had been received, was approximately 5.9m allowances.

Given the over-allocation of allowances in Phase I and the current market conditions Ministers do not consider that it would be appropriate to sell those left in the New Entrant Reserve. These allowances will be cancelled at the beginning of May in the same way as all other Phase I allowances.

Last year, 5.8m allowances from the New Entrant Reserve were sold through Barclays Capital, with the revenue raised going into the consolidated fund.

Notes to editors:

1. The EU ETS is the central plank of EU climate change policy. The UK is committed to building on the EU ETS as its main way of pricing carbon in the economy, to ensure emissions are effectively limited and combat the serious threat of climate change. The scheme commenced on 1 January 2005. The first phase ran from 2005-2007. The second five year phase started on 1 January 2008 and runs until the end of 2012.

2. The scheme works on a 'Cap and Trade' basis. EU Member States are required to set an emission cap for all installations covered by the Scheme. Each operator is then allocated allowances for the particular commitment period in question. The number of allowances allocated to each installation for any given period, (the number of tradable allowances each installation will receive), is set down in a document called the National Allocation Plan.

3. The New Entrant Reserve was created to provide allowances to installations that started operation between 31 December 2003 and 31 December 2007, that would not otherwise have received allowances. The National Allocation Plan allows for surplus allowances to be sold or cancelled, subject to certain conditions. Allowances from Phase I are not valid for use in Phase II of the scheme.

4. More information on EU ETS is available at: http://www.defra.gov.uk/environment/climatechange/trading/eu/index.htm

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