EU Emissions Trading SchemeIntroductionThe EU Emissions Trading Scheme (EU ETS) is one of the policies being introduced across Europe to reduce emissions and is a high priority of the UK Government.
The EU ETS works on a 'cap and trade' basis. EU Member State governments set an emission cap for all installations covered by the scheme e.g electricity generators, cement works etc. Industry is allocated emissions 'allowances' (equivalent to one tonne of CO2) which can then be traded. This is intended to encourage companies that are in a position to reduce emissions to do so and to sell any unused allowances.The first phase of the Scheme ran from 2005-2007 and the second phase runs from 2008-2012 to coincide with the first Kyoto Commitment Period. Negotiations are currently ongoing on Phase III of the Scheme, running from 2013-2020.
The number of tradable allowances each installation will receive is established in the National Allocation Plan (NAP). The Emissions Trading Directive sets a limit that up to 10% of allowances may be auctioned. The UK NAP states that the UK will auction 7 per cent of allowances - approximately 86 million - plus any surplus from the new Entrant Reserve (NER) and allowances from closures up to the 10 percent limit set by the Directive.
The DMO has been appointed by the Department of Energy and Climate Change (DECC) to conduct the auction of EU Allowances in the UK for Phase II of the Scheme. |