Department for Environment, Food and Rural Affairs
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Applications to participate in Emissions Trading Auction open
Organisations can now apply to become Primary Participants in the UK's auctions for Phase II of the EU Emissions Trading Scheme. Primary Participants can bid directly for allowances and will act as intermediaries in the competitive element of the auctions, collecting and submitting bids on behalf of indirect bidders who wish to take part in the auction.
Any organisation with an EU ETS registry account can apply to become a Primary Participant, providing their organisation can fulfil the eligibility criteria. Anyone who holds an EU ETS registry account can then bid for carbon allowances in an auction through the Primary Participants.
This application process follows the Community Emissions Trading Scheme (Allocation of Allowances) Scheme auctioning framework, published on 29 July which sets out the terms governing the appointment of Primary Participants and eligibility criteria for the role.
Details of how to apply to become a Primary Participant are on the Defra website at: http://www.defra.gov.uk/environment/climatechange/trading/eu/operators/primaryParticipants.htm
A full copy of the Scheme is available at: http://www.hm-treasury.gov.uk/media/4/E/euetsscheme290708.pdf
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 per cent 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. Organisations can 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.
7. Once appointed, Primary Participants must abide by the "Terms" set out in the Scheme, which aim to ensure 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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