Government seeks comments on proposed carbon trading auctions

The consultation outlines four key proposals for how emissions trading auctions could be structured in the UK. It suggests:

Auctions or sales of carbon allowances will take place on a quarterly basis. Auctions will consist of a single round using a uniform price model where all successful bidders pay the same price.

Bids can be either direct non-competitive bids of up to 10,000 allowances or indirect competitive bids via intermediaries. Also, auctions will not be restricted to particular sectors or to UK registry account holders but will be open to anyone with an EU registry account.

Environment Minister, Phil Woolas, said the EU Emissions Trading Scheme is key to the UK achieving cost effective reductions in emissions: "The model set out in this consultation moves us a step closer to putting auctioning of emissions allowances into practice and I want to see the UK take a leading role in this pivotal and innovative business."

The consultation and more information can be found on the Defra website. The deadline for responses is 14 March 2008.

Defra notes that the EU emissions trading scheme (EU ETS) is a key element of the European Climate Change Programme and will be critical to meeting the EU's overall Kyoto Protocol commitment of an 8% reduction in greenhouse gas (GHG) emissions below 1990 levels by 2008-2012. The EU ETS is the world's largest market for CO2 emissions allowances covering the 27 Member States of the European Union and approximately 12,700 installations.

Over 1000 installations throughout England, Northern Ireland, Scotland and Wales fall into the Scheme. Each installation must obtain a greenhouse gas permit from the regulator, and monitor and report CO2 emissions.