News

   

NEWS RELEASE

Ref: 62/08
Date: 28 February 2008

Nobel House, 17 Smith Square, London SW1P 3JR
Out of hours telephone 020 7270 8960

UK Delays Issuing EU Carbon Allowances

The UK has decided to delay issuing 2008 EU Carbon Allowances because the European Commission is still discussing a date of the carbon trading registry system, connected to the UNFCCC’s International Transaction Log (ITL), to go live.

The UK, along with other Member States established the necessary link with the ITL last year, but these have not gone live as the CITL – ITL link has not until recently been established, and testing is not complete. Following discussion with UK carbon market participants, the UK Government believes the carbon trading registry system, connected to the UNFCCC’s International Transaction Log (ITL), must be established before November at the latest.

The UK hopes to be able to issue carbon allowances with minimal delay, and in the meantime activity in the carbon markets will continue to operate as normal because the bulk of EUA trading is in the secondary market using forward contracts. Spot trading can still continue using allowances which have entered the market from those countries that have issued Phase II allowances. However, given the UK’s position as a leader in the global carbon market and its strong commitment to emissions trading as a key tool for pricing carbon into the economy and helping to tackle climate change, the Government believes that all concerned need a firm date for connection of the EU carbon trading registry systems to the ITL to go live.

The UK will also be looking to ensure that the data migration necessary when the registry system connected to the ITL goes live does not cause unexpected delay.

The UK is aware that the Commission is working hard on these points, and will offer all the assistance it can.

Under the Kyoto Protocol, countries are required to establish national registries and connect these to the ITL. These registries form a system of connected electronic databases in which all holdings by Governments, companies and individuals of carbon allowances are held. A link between the ITL and the European Commission’s Community Independent Transaction Log (CITL) ensures that relevant transactions comply with EU Emissions Trading Scheme (EU ETS) legislation.

Notes to editors

  1. The EU ETS is the central plank of EU climate change policy. The UK is committed to building on the EU ETS as its main way of pricing carbon in the economy, to ensure emissions are effectively limited and combat the serious threat of climate change.
    The scheme commenced on 1 January 2005. The first phase ran from 2005-2007. The second five year phase started on 1 January 2008 and runs until the end of 2012. This second phase coincides with the first Kyoto Commitment Period. Subsequent phases are likely to be eight years.
    The scheme works on a ‘Cap and Trade’ basis. EU Member State governments are required to set an emission cap for all installations covered by the Scheme.
    Each operator is then allocated allowances for the particular commitment period in question. This allocation normally takes place by 28 February each year. The number of allowances allocated to each installation for any given period, (the number of tradable allowances each installation will receive), is set down in a document called the National Allocation Plan. All UK installations know their Phase II allocation and allowances are not required for compliance purposes until April 2009.

  2. The majority of EU Member States, including the UK, have already established and tested their technical links to the ITL but these have not gone live (as for example, Japan has) as the CITL – ITL link has not until recently been established, and testing is not complete.
    The carbon trading registry system connected to the ITL is unlikely to go live for some months (the UK would like it to be by the summer). For this reason the Commission would like Member State registries to link just to the CITL for a temporary period of time, rather than direct to the ITL. This temporary approach requires a data migration when the EU later moves over to the ITL connected system of registries.

  3. A significant number of other Member States will not be able to issue allowances by 28 February because they do not have approved National Allocation Plans. The following link to the European Commission’s website provides details of the status of Member State National Allocation Plans, including whether European Commission approval has been given: www.ec.europa.eu/environment/climat/emission/citl_en.htm

  4. The EU has to achieve significant emissions reductions to tackle climate change domestically and demonstrate leadership globally in mitigating climate change.
    The current EU ETS Review is an excellent opportunity to map out a long-term policy framework and provide clear and convincing signals about the scheme.
    Emissions trading provides the most favourable economic instrument for achieving these reductions – the alternatives are increased regulation or taxes.
    EU ETS should incentivise innovation and development of low-carbon technologies and innovation.
    Emissions trading offers an opportunity for European businesses to get ahead of the game and make the technological changes necessary to achieve emissions abatement and move towards a low-carbon economy.
    The UK is working with the Commission, Member States and business to improve the EU ETS and deliver significant benefits, both to climate change policy and EU competitiveness.

End

Public enquiries: 08459 335577
News releases available on our website:
www.defra.gov.uk
Defra's aim is sustainable development

Page published: 28 February 2008

Department for Environment, Food and Rural Affairs