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Contents

1 EXECUTIVE SUMMARY

2 SECTION 1: OVERVIEW OF THE SCHEME

2.1 TIMETABLE

2.2 LESSONS FROM EMISSIONS TRADING IN OTHER COUNTRIES AND CONTEXTS

2.3 TRANSITION TO EU AND INTERNATIONAL TRADING SYSTEMS AND LONGER TERM

3 SECTION II: THE PROPOSED SCOPE OF THE UK EMISSIONS TRADING SCHEME

3.1 ELIGIBILITY RESTRICTIONS

3.2 SINGLE OR SEPARATE TRADING SCHEMES

3.3 DEFINITION OF "LEGAL ENTITY"

3.4 BASIS FOR PARTICIPATION (SECTOR, SIZE)

3.5 ROLE OF ELECTRICITY GENERATORS

3.5.1 Allocating indirect emissions to end users

3.5.2 Electricity from renewable energy

3.5.3 Issues to resolve before the Scheme can start

3.5.4 Ways to avoid double counting/discrepancy

3.6 COVERAGE OF SIX GREENHOUSE GASES

4 SECTION III: THE FINANCIAL INCENTIVE AND THE ALLOCATION OF TARGETS

4.1 FINANCIAL INCENTIVE

4.1.1 General points

4.1.2 Other ways to encourage firms to agree to emission reductions and enter trading

4.1.3 Criteria could be used to judge that the incentive has been successful

4.2 BASIS OF ALLOWANCE ALLOCATION

4.2.1 Alternatives to grandfathering in a voluntary scheme

4.2.2 Treatment of new entrants

4.2.3 Baseline setting

4.2.4 Coverage of emissions - both direct and indirect

4.2.5 Approaches to adjustment of baselines and targets for changes in activity, mergers, de-mergers and acquisitions, and outsourcing

4.3 EXPECTATIONS FOR THE BIDDING PROCESS

4.3.1 General

4.3.2 Bidding process: uniform price - static or dynamic option

4.3.3 Minimum emission reduction (MER) and maximum budget share constraints

5 SECTION IV: MONITORING, VERIFICATION AND REPORTING EMISSIONS

5.1 BALANCE BETWEEN SIMPLICITY AND ACCURACY/CERTAINTY

5.2 MINIMISING THE ADMINISTRATIVE BURDEN

5.3 EXISTING REPORTING REQUIREMENTS THAT COULD INFORM THE NON CO2 GASES PROTOCOL

5.4 TWO TIER APPROACH TO VERIFICATION OF EMISSIONS DATA

6 SECTION V: THE MECHANICS OF TRADING

6.1 RELATIVE SECTOR PARTICIPATION

6.2 THE GATEWAY

6.3 BANKING AND BORROWING PROVISIONS

6.4 ROLE OF BROKERS AND EXCHANGES

7 SECTION VI: PROJECT BASED CREDITS AND OTHER TRADING SCHEMES

7.1 PROJECT CREDITS

7.2 LINKS WITH RENEWABLE ENERGY OBLIGATIONS, WITH ENERGY EFFICIENCY COMMITMENTS, AND FLARE CONSENTS

7.3 ROLE OF SINKS, NON AGREEMENT ENERGY EFFICIENCY AND AVIATION EMISSIONS

8 SECTION VII: ADMINISTRATION OF THE SCHEME

8.1 EMISSIONS TRADING AUTHORITY

8.2 REGISTRY

8.3 COMPLIANCE AND PENALTIES

8.4 BUYER VERSUS SELLER LIABILITY

8.5 LINKS WITH OTHER REGULATORY BODIES

ANNEX 1

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Published 3 May 2001

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UK Climate Change Programme

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Environmental Protection Consultation Papers Index

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