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- Climate change in brief
- Climate and energy package
- Roadmap 2050
- European Climate Change Programme
- Greenhouse gas Monitoring & Reporting
- Emissions Trading System
- Effort Sharing Decision
- Low Carbon Technologies
- Transport
- Ozone Layer Protection
- Fluorinated Gases
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- Adaptation to climate change
- Climate finance
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Additional tools
The EU Emissions Trading System enables participating installations like factories and power plants in 30 countries to receive emission allowances (a certain amount of greenhouse gases that they can emit) which they can sell to or buy from one another as needed. While auctioning of carbon allowances is limited during the first and second trading period, it will be the main allocation method as of 2013.
During the first trading period (2005 to 2007), Member States have auctioned only very limited quantities of carbon allowances, and also during the second trading period (2008 to 2012) the lion's share of carbon allowances is still allocated for free. From the start of the third trading period in 2013 about half of the allowances are expected to be auctioned. Auctioning is the most transparent allocation method that allows market participants to acquire the allowances concerned at the market price.
Auctioning of allowances becomes rule as of 2013
The revision of the Emission Trading Directive, agreed on 17 December 2008, foresees a fundamental change as from the third trading period starting in 2013. Auctioning of allowances will be the rule rather than the exception. No allowances will be allocated free of charge for electricity production, with only limited and temporary options to derogate from this rule.
Sectors and sub-sectors found to be exposed to a significant risk of carbon leakage will receive allowances for free based on ambitious benchmarks, but for non exposed industry such allocations will be phased out. These rules imply that as from 2013 at least half the total number of allowances is expected to be auctioned.
An open, transparent, harmonised and non-discriminatory process
The revised Directive sets out various objectives and principles for the auctioning of emission allowances. Auctions shall be conducted in an open, transparent, harmonised and non-discriminatory manner and the process should be predictable.
Auctions shall be designed to ensure full, fair and equitable access for small and medium sized enterprises covered by the EU ETS and small emitters. All participants should have access to the same information at the same time and an appropriate legal framework should be in place to minimise any risk of money laundering, terrorist financing, financial crime, insider dealing and market manipulation. The organisation and participation in auctions should be cost-efficient and undue administrative cost should be avoided. The Commission's Auctioning Regulation seeks to ensure these objectives.
A common platform to auction emission allowances procured by Commission and Member States
The Auctioning Regulation provides for the Member States and the Commission to procure jointly a common platform to auction emission allowances on behalf of the Member States. A common auction platform is expected to be the most cost-efficient approach for Member States and bidders. The Commission considers that a common platform best ensures respect of the principles of non-discrimination, transparency and simplicity, provides the best guarantees for full, fair and equitable access to small and medium sized enterprises covered by the EU ETS and small emitters, and best minimises the risk of market abuse.
Nevertheless, Member States that wish to appoint an auction platform of their own are allowed to do so, since the Regulation provides for adequate rules as to the functioning of such auction platforms and the coordination with the common auction platform.
The Commission and the Member States have started the implementation of the Regulation.