UK first to auction carbon
Nov 19, 2008 -- M2 PRESSWIRE
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 GBP54m excluding VAT,
or GBP13.60 per allowance, Euro/Sterling exchange rate 0.8428.
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.
Notes:
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 Euros 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. The UK NAP can be found at: http://www.defra.gov.uk/environment/climatechange/trading/eu/pdf/nap-p
hase2.pdf
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: http://www.defra.gov.uk/environment/climatechange/trading/eu/index.htm
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