Emissions Trading System: Member States endorse more secure registry rules
Today the Climate Change Committee backed proposals by the European Commission to enhance the integrity and the security of the registries system underpinning the EU Emissions Trading System (EU ETS). If the regulation is endorsed by the Parliament and the Council, registry administrators and law enforcement authorities will be able to detect fraud more easily. Now the Commission will focus on the outstanding area of putting in place a regulatory framework for the spot market in carbon allowances.
EU Commissioner for Climate Action Connie Hedegaard said: "I warmly welcome the support by Member States for the changes, which will significantly boost the security of national registries and the future single registry. The regulation also lays down more detailed rules for the Single Registry, which will replace national registries from early next year. With these measures and a more harmonized approach for the third phase of the ETS due to start in 2013, we have certainly strengthened the integrity of the European carbon market. I am grateful for the good cooperation with stakeholders and look forward to continue this constructive dialogue".
The security of the registries has become a priority as a result of the fraud with emission allowances earlier in 2011. Then the Commission took immediate action by temporarily suspending all national registries until they fulfilled minimum security requirements. The Commission's new proposals will bring the security of the future Single Registry in line with state-of-the-art security measures used in the financial sector.
For instance, comprehensive preventive measures to avoid fraud will be introduced, including out-of band confirmation of transactions, the introduction of trusted account list and new account categories, the 4-eye principle, and strengthened know-your-customer checks. Second, competent authorities will be able to respond quickly in case of fraud, for instance by delaying the completion of some transactions, by freezing allowances and accounts in case of a suspicious transaction and by giving wider access to law enforcement authorities to confidential information. Finally, the regulation ensures that the market would be less disrupted if fraud were to occur: Allowances will be fully fungible for compensation claims, which means that an allowance can be substituted by any other allowance, if there were a legal claim. In addition, the serial numbers of allowances will be visible only to relevant law enforcement authorities.
The EU ETS gearing up for the third trading period
The EU ETS covers about 11.000 industrial installations and 45% of the EU's emissions. Aviation will be included in the EU ETS as of 2012.
As of 2013, the EU ETS will enter the third trading phase until 2020 during which emissions from industrial installations have to be brought down to 21% below 2005 levels.
The main changes in the third trading phase are:
- Transition from caps set at Member State level to one single EU-wide cap per sector;
- Transition from mainly free allocation to more than half of the allowances being auctioned;
- Harmonisation of free allocation rules based on ambitious EU-wide benchmarks;
If the European Parliament and the Council do not raise objections, the Commission will adopt the proposed regulation after a three-month scrutiny period.