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It follows the publication today of allowances for installations covered by Phase I of the Scheme. Emissions trading will start in the UK with the UK Registry becoming operational, allowing operators participating in the scheme to access their allowances.
These are the final steps towards full UK participation in the Scheme. Operators will be able to begin trading the allowances once their Registry accounts are opened this week. The Scheme is set to help reduce carbon dioxide emissions by around 65 million tonnes carbon dioxide (around 8 per cent) below projected emissions of the installations covered by the Scheme over the next three years.
The Emissions Trading Registry is web-based, and records CO2 allowances held in firms accounts. The Registry allows allowances to be transferred to other accounts both within the UK and in other participating countries. The Registry software, developed by Defra, has been a great success having been licensed to 12 other States.
Margaret Beckett, Secretary of State for Environment, said:
"I am delighted this Scheme is now going live in the UK. It will become one of the main ways to cut carbon dioxide emissions, while maintaining economic growth.
Emissions trading is a key component of UK and wider European action to tackle climate change. It gives industry a clear incentive to reduce carbon emissions, whilst enabling it to do so at least cost. The opening of the UK Registry means that UK companies can start to participate fully in the Scheme and provides London's emerging carbon market with the opportunity to fulfil its potential as an international centre for carbon trading.
The Government is committed to using the UK's G8 and EU Presidencies this year to combat the growing problem of man-made climate change."
Alan Johnson, Secretary of State for Trade and Industry, said:
"Today's allocations will enable UK industry to participate fully in this emerging market in carbon. They will help balance the vital needs of meeting our climate change objectives while maintaining British competitiveness."
Background
1. The EU Emissions Trading Scheme (EU ETS) is one of the policies being introduced across Europe to tackle emissions of carbon dioxide and other greenhouse gases and thereby combat the serious threat of climate change. It is compulsory for all 25 EU Member States covering 1055 installations in the UK and more than 12,000 across the EU. Participants are allocated allowances, each allowance representing a tonne of the relevant emission, in this case carbon dioxide equivalent. Emissions trading gives companies the flexibility to meet emission reduction targets according to their own strategy; for example by reducing emissions on site or by buying allowances from other companies who have excess allowances.
2. The Scheme commenced on 1 January 2005. The first phase runs from 2005-2007 and the second phase will run from 2008-2012 to coincide with the first Kyoto Commitment Period. It works on a "cap and trade" basis, with EU Member State governments required to set an emission cap for all installations covered by the Scheme. Each installation is allocated carbon dioxide emission allowances for the phase in question. The number of allowances allocated to each installation for any given period is specified in a National Allocation Plan (NAP).
3. The UK NAP was notified to the European Commission in April 2004, and was approved on 7 July 2004, with two conditions: that further information on the new entrant reserve, and details of Gibraltar's National Allocation Plan should be provided.
4. Following finalisation of UK emissions projections, emissions by UK installations covered by the EU ETS for the first phase (2005-2007) were subsequently estimated to be around 8% higher than was the case when the NAP was submitted to the Commission in April 2004. An amendment to the NAP was submitted to the Commission on 10 November 2004 which proposed an increase of 19.8 million allowances (less than 3%) to the total quantity.
5. An announcement on 14 February 2005 specified how the amended total of 756.1 million allowances would be distributed at installation level. It also stated that any allocation below this total figure would be achieved by reducing the number of allowances given to the electricity generation sector.
6. On March 11 2005 the Government announced that it intended to issue allowances (following the Commission's rejection of the proposed amendment of 756m allowances) as soon as possible to allow operators of UK installations to participate in the Scheme, whilst initiating legal proceedings against the European Commission. These legal proceedings seek to require the Commission to consider the substance of the proposed amendment.
7. The Government has submitted legal applications to the Court of First Instance, and has also made an application for proceedings to be expedited. It is hoped that judgement of the court will be received in the first half of 2006.
8. Today's announcement is based on the previously approved 736 million allowances, and is without prejudice to the legal challenge.
9. The Emissions Trading Registry is web-based, and records CO2
allowances and units that are held in firms accounts, and their
compliance. Electronically-linked national registries are central to
both the EU Emissions Trading Scheme and wider international
emissions trading under the Kyoto Protocol (from 2008). The 12 other
countries that have been licensed to use the UK's Registry software
are: Denmark, Estonia, Finland, Hungary, Ireland, Italy, Latvia,
Lithuania, Slovenia, Sweden, the Netherlands and Norway. Four of
these (Denmark, Finland, Sweden and the Netherlands) have already
started trading. Several other countries have been in contact with
us to discuss their requirements. Further details of the opening of
the registry will be available on the Defra and Environment Agency
websites
(http://www.defra.gov.uk/environment/climatechange/trading/eu/index.htm,
http://www.environment-agency.gov.uk/business/444217/590750/590838/1009544/?version=1&lang=_e).
10. Contact Defra Press Office on 020 7238 5599 or DTI Press Office on 020 7215 5000.
11. The October, February and March announcements are available at:
http://www.defra.gov.uk/news/2004/041027a.htm,
http://www.defra.gov.uk/news/2005/050214c.htm and
http://www.defra.gov.uk/news/2005/050311b.htm.
Further information will be available at
http://www.defra.gov.uk/environment/climatechange/trading/eu/index.htm and http://www.dti.gov.uk/energy/sepn/euets.shtml.
Department of Trade and Industry
7th Floor
1 Victoria Street
London SW1H 0ET
Public Enquiries +44 (0)20 7215 5000
Textphone +44 (0)20 7215 6740
(for those with hearing impairment)
www.dti.gov.uk
