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Germany selects phase III carbon auctioning platform

29 Feb 2012 18:01:45 | edcm

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Germany has chosen to auction up to 85m free EU allowances (EUAs) in phase III of the EU emission trading system (EU ETS) via the European Energy Exchange (EEX).

The Federal Environment Agency awarded the contract to the EEX on 27 February, it said on Wednesday.

"Until the establishment of a permanent platform, auctions will be carried out on the transitory platform," the Agency said.

The transitional platform is expected to hold auctions over a maximum of 16 months to sell 23.5m allowances to stationary plants and airlines to be assigned to Germany in 2012, according to the original tender document. The temporary platform will remain in place until 2013, when the country's permanent auction platform will start.

Phase III changes

More than half of all EUAs are estimated to be auctioned during phase III but Germany - Europe's biggest emitter - has opted out of the EU's unified auction platform, citing concerns about competition in the secondary carbon markets.

Last month, Germany had pledged that its platform will be operational in the second half of 2012, when the first auctions to airlines, or EU aviation allowances (EUAAs), and other emitters for 2013 are due to take place (see EDCM 9 January 2012).

According to the German carbon registry, DEHSt, if all EU auctions were to take place on one bourse, the secondary market would likely also concentrate on that bourse.

This would harm competition between bourses, a DEHSt spokeswoman said.

And if an exchange was to fall victim to market manipulation or technical problems, disruption to the market would be exacerbated if trade was concentrated on that one platform, a spokeswoman added.

Apart from Germany, the EEX also runs primary EUA auctions for the Netherlands and Lithuania and cooperates with the European Investment Bank on the sale of the NER300.

Germany, Poland and the UK have told the Commission that they plan to opt out of the planned common platform for auctioning off EUAs in phase III, starting 2013.

The agreement between the EEX and the German government is still subject to approval by the European Commission and the Climate Change Committee, a subsection of the Commission that deals with emissions.

Low prices fuel ETS fears

Also on Wednesday, Germany's lower house, the Bundestag, dismissed concerns raised by the country's Green Party that low carbon prices are undermining the EU ETS as a viable policy instrument to tackle climate change.

"Despite the price crash of CO2 certificates, the government does not fear that the EU ETS is at risk," the Bundestag said. However, the Bundestag added that it was testing various options to boost funds for renewable or energy efficiency projects.

The Bundestag also declined to comment on calls to tighten Europe's emissions cap by 2020, pushing it from a 20% to a 30% reduction target against 1990 levels. MLDB

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