Auctioning
Latest news
- July 2009: The Government distributed 4.2 million allowances in its fourth successful auction in Phase II of the EU ETS. The auction cleared at €13.38 (£11.56). The auction results are published on the UK Debt Management Office’s website.
- June 2009: The Government held its third successful auction in the EU ETS on Thursday 4th June. 4.2 million allowances were distributed at a clearing price of €13.83. (£11.99).
- April 2009: HM Treasury has published The Community Emissions Trading Scheme (Auctioning of allowances) Scheme 2009. This replaces the Community Emission Trading Scheme (Allocation of Allowances for Payment) Scheme 2008. The amended scheme implements a previous government commitment to establish a non-competitive bidding facility especially designed for smaller emitters.
- March 2009: The Government distributed approximately 4 million allowances at a clearing price of €10.98 (£10.12) on Tuesday 24th March. The auction results are published on the UK Debt Management Office’s website.
- February 2009: The Government has announced that it will auction 4 million allowances in its second auction in Phase II of the EU ETS, on Tuesday 24th March 2009. The Government has also published an auction schedule with dates and volumes for future auctions, up to April 2010. The full schedule is available on the UK Debt Management Office’s website.
- January 2009: The Government intends to hold its second auction in Phase II of the EU ETS on Tuesday 24th March 2009. The auction will comprise a competitive bidding facility only. The Primary Participant application window has now been reopened and is expected to remain open for the remainder of the Phase.
- November 2008: UK Government has held the first UK auction in the EU ETS, where approximately four million allowances were distributed. Please see ‘Current auctions’ below for more information
- October 2008: DECC has published guidance for indirect bidders on how to bid in the UK EU ETS auctions through a Primary Participant. Please click here for further information
Current auctions
The Government successfully held the first UK auction in the EU ETS, and the first auction in Europe in Phase II of the System on 19 November 2008. Approximately four million allowances were distributed at a clearing price of €16.15 (£13.60), raising £54m. The auction was more than four times oversubscribed. Barclays Capital, BNP Paribas, JP Morgan and Morgan Stanley acted as Primary Participants.
Government collected feedback on the first auction from stakeholders, in order to inform future auction policy. The exercise involved the completion of a feedback questionnaire by Primary Participants, indirect bidders and stakeholders who considered participating in the auction. A summary of the feedback received is now available online (PDF, 25KB).
Since then, Government has held three further auctions, distributing a further 12.4 million allowances. The results for all UK auctions are published on the UK Debt Management Office’s website.
An auction schedule with dates and volumes for future auctions, up to April 2010 is published on the UK Debt Management Office’s website.
How to participate
- Competitive bids in an auction must be placed through an intermediary known as a Primary Participant. Organisations must apply to DECC to become Primary Participants and will be assessed against the eligibility criteria set out in the Scheme.
- Further information on the role of Primary Participants and how to apply to become a Primary Participant.
- DECC has now produced a guidance document (PDF, 430 KB) for account holders who wish to place a competitive bid through a Primary Participant. These bidders are known as ‘indirect bidders’. Click here for further information on indirect bidders and how to bid in an auction through a Primary Participant.
- A list of approved Primary Participants is available on the Debt Management Office’s website
Government intends to have the non-competitive element in place later in 2009. Non competitive auctions are designed for smaller compliance buyers, with a maximum bid size of 10,000 allowances. Further information on non competitive auctions and how to participate will be available in due course.
Further information on auctioning
- Frequently Asked Questions on auctioning (PDF 100 KB)
Legislation
The powers to auction are within the Finance Act 2007. The legislative framework for auctions comprises Regulations and a Scheme made by HM Treasury. The Regulations came into force on 11 July 2008 and can be found at: www.opsi.gov.uk/si/si2008/pdf/uksi_20081825_en.pdf
The Regulations have subsequently been amended to allow for criminal penalties. The Amendment Regulations can be found at:
www.opsi.gov.uk/si/si2008/pdf/uksi_20081939_en.pdf
The Scheme sets out how auctions will be conducted and the terms governing participation. The Scheme was published by HM Treasury on 29 July and can be found at:
www.hm-treasury.gov.uk/d/euetsscheme050808.pdf
The Scheme was amended on 23 April 2009. The amended Scheme can be found at:
www.hm-treasury.gov.uk/consult_community_emissionscheme.htm
Background
Auctioning is viewed as a more efficient allocation methodology than free allocation because it encourages those who value allowances most to pay for them; it strengthens the aim of the EU ETS to establish a price for carbon that informs industry’s investment decisions and incentivises abatement.
Phase II (2008 – 2012)
The UK’s Phase II National Allocation Plan (NAP II) states that the UK will auction 7% of allowances – approximately 85 million across the phase – plus any surplus from the New Entrant Reserve (NER) and allowances from closures up to the 10% limit set by the Directive. The 7% for auctions has been taken from the allocation which would otherwise have been given for free to the Large Electricity Producers sector, as that sector is more protected from international competition and has greater potential for abatement than in others sectors.
Government’s consultation on options for auction design (PDF 270 KB) closed on 14 March 2008 and Government published its response on 9 June 2008. 9 June 2008 - Government response to consultation document on Phase II auction design (PDF 140 KB)
Further information
Phase III
The EU ETS has recently been revised under a new Directive agreed in December 2008 in order to be more environmentally ambitious and is consistent with keeping the EU on track to deliver a 60-80% cut in emissions by 2050.
In Phase III of the EU ETS (from 2013) there will be a significant increase in auctioning levels. This will ensure that the cost of carbon is better integrated into business decisions. Overall at least 60% of allowances will be auctioned by 2020, compared to around 3% in Phase II. In the UK there will be 100% auctioning to the power sector; this will also be the case across most of the EU.
Page last modified: 13 July 2009
Page published: 8 September 2003