The EU registries system is the vital infrastructure which will enable the world’s largest emissions trading scheme to take off. In the same way as companies need bank accounts to transfer money, the 12,000 industrial installations covered by the scheme simply cannot follow through on trading contracts or comply with their emissions reduction target without the electronic registries system. The system represents cutting-edge technology, which is fitting given that the trading scheme itself is breaking new ground in EU environmental policy-making.
How the registries system will work
Each industrial plant covered by the trading scheme will have an account in its national registry, into which its own allowances will be issued. In addition, any organisation or individual wishing to participate in the market will be able to open their own trading account in any of the registries. All those trading in the market will access these electronic accounts via the internet to transfer allowances as agreed under trading contracts. All companies with emission reduction targets will in addition use these accounts to cancel allowances equal to their yearly emissions.
Companies will also be able to use credits gained under the Kyoto Protocol from emission-saving projects in other countries to meet their annual emissions targets. This will require the Protocol’s registries system, under the responsibility of the UN, to be established and linked to the EU system. To this end, the Commission has so far provided funding totalling €650,000 and will also donate software valued at €560,000.
As the EU registries system is electronic, allowances will not be printed and will exist only in electronic form in registry holding accounts.
Prior to 1 January, the market has been relying upon "forward" contracts which oblige the seller to transfer allowances to the buyer at a specified date in the future (when the registries system is in place). Upon the establishment of the registries system, a "spot" market will be able to develop whereby deals can be immediately contracted and executed. This step will therefore promote an increase in the pace and size of the market.
The transaction log, which will ensure that each transfer of allowances in the national registries is carried out in accordance with the rules of the Directive, has been developed by the Commission. Its public web site will be accessible from 1 January 2005 at:
http://europa.eu.int/comm/environment/climat/home_en.htm.
Further information on the EU emissions trading scheme can also be found at this site and in MEMO/04/44.
