HM Treasury

Consultations & legislation

The Community Emissions Trading Scheme


The EU Emissions Trading Scheme (EU ETS) aims to reduce emissions of carbon dioxide at least cost to industry. It currently covers more than 10,000 installations in the energy and industrial sectors that are collectively responsible for close to 50% of the EU emissions.

Installations are allocated carbon allowances that can be traded on secondary markets to help them meet their emissions reductions targets.

The UK National Allocation Plan (NAP) for the second trading period (2008-2012) sets aside 7 percent of the allowance cap for auctioning, amounting to approximately 86 million allowances over the phase. The percentage of auctioned allowances will increase significantly during the third trading period (2013-2020), up to at least 60 percent by 2020.

After the approval of the NAP the Government carried out two consultation exercises. The first Consultation (December 2007) focused on the design of the UK auctions during Phase II. The second consultation (February 2007) gave interested parties the opportunity to see and comment upon the relevant draft secondary legislation.

After the conclusion of the consultation exercise, the relevant secondary legislation was approved:

HMT has appointed the Department of Energy and Climate Change, (DECC) as the person conducting the auction. DECC has appointed the UK Debt Management Office (DMO) to act as its agent.

Relevant Links

Independent Observer

The Treasury has appointed an Independent Observer as required by Paragraph 12 of the Regulations to provide additional assurance to the market and the general public that the UK’s EU ETS auctions are conducted in accordance with the Regulations and the Scheme.

The Independent observer prepares a report on the conduct of each auction. The report is published on HMT and DMO websites.

The Independent Observer is David Steeds, Senior Partner at Evolve Business Consultancy Ltd.

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