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UK First to Auction Carbon


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Released 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 £54.4m excluding VAT, or £13.61 per allowance.

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



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 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.

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  (opens in new window)

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Article Published/Sorted/Amended on Scopulus 2008-11-21 10:39:31 in Business Articles

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