UK Phase III auctions depend on EU registry
The UK plans to continue selling EU allowances (EUAs) from the Phase III cap in the same way it has sold them from the Phase II cap. However, auctions would be held more frequently, a senior official in the Department of Energy and Climate Change (DECC), David Capper, told the Emissions Trading Conference, in Brussels, on Tuesday.
This means that the UK would not use any centralised EU platform to bring the Phase III EUAs to the market.
Capper, who heads DECC’s emissions trading unit, thought the most likely outcome would be that the EU Commission developed a centralised platform that member states could opt to use. “Most would do so,” he predicted.
Some countries might go it alone, however. The obvious candidates are those that have already, or plan to, hold auctions in phase II. Germany has already stated that it wants to continue its own model. Austria, the Netherlands, Ireland and Hungary could follow suit.
This would bring the number of auctioning platforms in Phase III to at least six – too many, according to some traders.
Ranjit Prasad, Shell’s global head of CO2 trading, said: “For us, five to six auctions would be too many. A single platform would be the best. And if we can’t have that, we would like to see two to three at the most.”
Timing of auctions
Capper later told ICIS Heren at the sidelines of the conference that the earliest likely date for auctioning would be mid-2011 – and that this would only be possible if the EU passes new registry regulation ahead of schedule.
The EU has said a single union-wide registry would not be in place until 2012. DECC is pushing for this to be brought forward by six months, in order to meet the power sector’s wish for 2011 auctions.
If the EU does not agree to putting forward the registry regulation, it will not be possible for the UK to hold auctions ahead of 2012. The reason is that the single EU registry needs to be in place before Phase III EUAs can be allocated.
However, Capper said that the UK would not delay the timing of the auction in response to low market prices: “The UK remains committed to 2011 auctions, and doesn’t want to artificially create higher prices by delaying auctions.”
DECC has not yet decided the volumes to be sold in the first Phase III auctions, Capper said, but added: “We need to take care not to dump a large volume on the market in one go. The main thing will be to bring volumes to the market in a steady and predictable way.”
Shell’s Prasad estimates that auctioning will account for around one-quarter of the secondary market in Phase II. IS
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