Auctioning

Policy

Auctioning is the most transparent method for allocating emission allowances and puts into practice the principle that the polluter should pay. Businesses covered by the EU Emissions Trading System (EU ETS) have to buy an increasing proportion of allowances through auctions.

As of phase 3 of the EU ETS (2013-2020), auctioning is the default method of allocating allowances. Allowances can also be allocated for free or placed in the Market Stability Reserve (MSR).

In total, the Commission estimates that 57% of the total amount of allowances will be auctioned in 2013-2020. Under the revised EU ETS Directive, the share of allowances to be auctioned will remain the same after 2020.

Auctioning approach by sector

Power generators must since 2013 buy all their allowances, with exceptions for some countries.

In other sectors, a transition to auctioning takes place progressively.

The manufacturing industry received 80% of its allowances for free in 2013. This proportion decreases gradually year-on-year, down to 30% in 2020, other than for sectors deemed to be exposed to carbon leakage.

The revised ETS Directive determines that between 2026 and 2030 this percentage will be further reduced to 0 (except for district heating) unless a review of the Directive determines otherwise.

In the aviation sector, 15% of allowances in circulation are auctioned (see FAQ).

Member States' shares of the auctioning volume

Member States are responsible for ensuring that their share of allowances is auctioned. The ETS Directive defines how the allowances to be auctioned are distributed to the Member States.

During phase 3 and pursuant to Article 10(1) of the ETS Directive,

88% of the allowances to be auctioned in 2013 to 2020 are distributed to the EU Member States on the basis of their share of verified emissions from EU ETS installations in 2005 or the average of the 2005-2007 period, whichever one is the highest;
10% are allocated to the least wealthy EU Member States as an additional source of revenue to help them invest in reducing the carbon intensity of their economies and adapting to climate change;
The remaining 2% is given as a 'Kyoto bonus' to nine EU Member States which by 2005 had reduced their greenhouse gas emissions by at least 20% of levels in their base year or period. These are Bulgaria, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia.

For phase 4 (2021-2030), the revised ETS Directive determines that:

90% of the allowances to be auctioned will be distributed to the EU Member States on the basis of their share of verified emissions, and
10% will be allocated to the less wealthy EU Member States for the purposes of solidarity, growth and interconnections.

The three EEA-EFTA countries also auction allowances in accordance with the same principles as the EU Member States.

The allowances made available to the Innovation Fund and to the Modernisation Fund will be auctioned too.

Auctioning revenues and their use

The total revenues raised from selling ETS allowances from 2012 until the end of 2017 exceeded EUR 21 billion – on average EUR 3.5 billion per year. In 2018, EUR 14 billion were raised, and in 2019 over EUR 14.6 billion.

The ETS Directive provides that Member States should use at least 50% of auctioning revenues or the equivalent in financial value for climate- and energy-related purposes.

Based on the most recent information available, around 80% of revenues in 2013-2018 were used for climate- and energy-related purposes.

Member States are requested to report annually on the amounts and use of the revenues generated, under the Monitoring Mechanism Regulation.

Auctioning rules

The auctioning of allowances is governed by the EU ETS Auctioning Regulation. This covers the timing, administration and other aspects of auctioning to ensure it is conducted in an open, transparent, harmonised and non-discriminatory manner.

The Auctioning Regulation puts into practice the criteria which the ETS Directive states auctions must meet, such as predictability, cost-efficiency, fair access to auctions and simultaneous access to relevant information for all operators.

Auction platforms

Twenty-eight countries (25 EU Member States and 3 EEA/EFTA countries) auction their allowances on the common auction platform. To this end, they have signed a joint procurement agreement.

Currently, the European Energy Exchange (EEX) in Leipzig is the common auction platform.

Some countries participating in the EU ETS have opted out of the common auctioning platform:

Germany has nominated EEX as its opt-out platform.
Poland is making use of the common auction platform to auction its share of allowances until the appointment of its opt-out platform.
ICE Futures Europe (ICE) in London acts as the United Kingdom's platform. The Withdrawal Agreement between the EU and the United Kingdom ensures that UK operators remain subject to compliance obligations for the years 2019 and 2020.

Nomination of the common auction platform

The common auction platform is nominated for up to five years by a joint procurement between the Commission and the participating countries, in accordance to the rules laid down by the joint procurement agreement.

For third parties, the Commission is the sole point of contact for information concerning the joint procurement procedures. See the Commission's information note.

The procurement procedures are published on Tender Electronic Daily (e-Ted). Documents on past and ongoing tenders are also accessible via the contracts and grants pages.

Documentation

Auction reports

Auctions by the common auction platform

Older reports...

Auctions for Germany

Older reports...

Auctions for United Kingdom

Please note that the Commission bears no responsibility for the contents of the reports prepared by Germany and the United Kingdom.

Auctioning Regulation and Joint Procurement Agreement

Auctioning Regulation and impact assessment

Joint Procurement Agreement

Transparency, implementation of the Auctioning Regulation by Member States

Use of auction revenues

FAQ

Questions and Answers: Auctioning

How many allowances will be auctioned in individual years up to 2020?

The ETS Directive contains the general principle that all allowances not allocated free of charge are to be auctioned. The annual volumes of general allowances to be auctioned and the timing and frequency of auctions are regulated in Chapter III and the volumes of aviation allowances in Chapter II of the Auctioning Regulation.

General allowances

In Recital 26 of its Decision 2013/448/EU of 5 September 2013 on the national implementation measures with respect to free allocation, the Commission estimated, in accordance with Article 10(1) of Directive 2003/87/EC (ETS Directive), the amount of general allowances to be auctioned in the period from 2013 to 2020 at 8,176,193,157. This amount can be broken down as follows and is used in the determination of the annual auction calendars:

Year	Estimated Amount	Estimated amount after deducting the maximum transitional free allocation for electricity generators ⁽¹⁾	Amount published in the auction calendars or foreseen to be auctioned⁽²⁾
2012	(120,000,000)⁽³⁾		89,701,500
2013	1,066,444,135	914,878,081	808,146,500
2014	1,055,457,778	925,952,714	528,399,500
2015	1,043,568,216	929,045,589	632,725,500
2016	1,030,777,152	932,392,360	715,289,500
2017	1,017,062,324	935,935,359	951,195,500⁽ ⁸⁾
2018	1,002,630,749	939,881,596	937,557,000
2019	987,734,136	945,663,715	945,669,641 ⁽⁴⁾
2020	972,518,667	972,518,667	972,518,667 ⁽⁴⁾
Cumulative withheld allowances ⁽⁵⁾			41,982,348
Withheld allowances to be placed directly into the Market Stability Reserve ⁽⁶⁾			900,000,000
Total	8,176,193,157	7,496,268,081	7,523,185,656 ⁽⁷⁾

volumes to be allocated free of charge pursuant to Article 10c of the ETS Directive.
taking into account allowances withheld for the purposes of back-loading, pursuant to Regulation (EU) No 176/2014 of 25 February 2014, and to be placed directly in the Market Stability Reserve pursuant to Article 1(2) of Decision (EU) 2015/1814 (MSR Decision) of 6 October 2015.
volume for early auctions, taken into account in subsequent years.
figures for 2019 onwards do not yet incorporate further adjustments to the amounts to be auctioned pursuant to Articles 1(5), 1(6) and 1(7) of Decision (EU) 2015/1814 (MSR Decision) of 6 October 2015. On the basis of the estimated amount of surplus allowances mentioned in recital 5 of the MSR Decision it is expected that the application of these articles will result in an adjustment consisting of further deductions from the volume of allowances to be auctioned.
cumulative withheld volume in accordance with the published auction calendars pending the start of auctions for the EEA-EFTA States. The volumes for such States will be added in relevant auction calendars as from completion of the necessary arrangements for their auctioning and the table will be adapted accordingly.
pursuant to Article 1(2) of Decision (EU) 2015/1814 ( MSR Decision) of 6 October 2015.
the difference with the total of the previous column is equal to the volume of the Article 10c non allocated volumes that are added to the auctions as from 2015 (7,809,757 allowances in 2015, 8,451,400 allowances in 2016, 5,138,654 allowances in 2017 and 5,641,832 in 2018) and the correction for allowances to be allocated for free (and accordingly deducted from the auction volume) to small emitters reintroduced into the ETS pursuant to Article 27 of the ETS Directive (74,507 allowances for 2017 and 49,561 allowances for 2018).
the amount published in the auction calendars as indicated in the table above includes the volumes (14,986,000 for 2016 and 70,891,000 for 2017) to be auctioned by Poland in 2017 making use of the common auction platform pursuant to the second subparagraph of Article 30(7) as well as the auction volume from an auction cancelled in December 2016.

Notes:

Figures for 2012 to 2018 represent the volumes auctioned or to be auctioned in accordance with the published auction calendars, including indicative volumes. In addition, the 2018 volumes include the volume of 101,053,000 allowances expected to be auctioned by UK as from the publication of their 2018 auction calendar. The 2013 volume had been determined on the basis of a conservative working estimate in the absence of the final information on the free allocation. Furthermore, certain States did not complete the administrative steps to allow auctioning in time, hence their volumes have been withheld. The cumulative withheld volume of 34,064,126 allowances pending the start of auctions for the EEA-EFTA States, is included separately in the table. At the moment of publication of 2018 auction calendars, the 937 557 000 allowances to be auctioned or expected to be auctioned in 2018 plus the cumulative withheld volume of 41,982,348 allowances amounted in total to 979 539 348 allowances. This is without prejudice to the timing and modalities for the auctioning of the withheld volumes which will be announced in due course.
Figures for 2019 onwards represent the estimated volumes to be auctioned and are without prejudice for any adjustment that may be needed, including from the application of the Market Stability Reserve from 2019 onwards.
As of entry into force of Commission Regulation (EU) No 1210/2011 (Backloading Regulation) of 23 November 2011 amending the Auctioning Regulation for postponing the auctioning of part of the allowances under the 'back-loading', 400 million allowances were withheld in 2014, 300 million in 2015 and 200 million in 2016. In 2014, the total amount of 400 million allowances withheld has been distributed per Member State/EEA EFTA State and the 2014 volumes have been reduced by the corresponding volumes. For Cyprus and Poland, given their allocation of free allowances pursuant to Article 10c of the ETS Directive, the 2014 volumes to be auctioned were less than the volumes to be withheld for the purposes of back-loading, so a corresponding adjustment is done in subsequent years, as provided for by the Regulation Amendment. The adjustment is 738,500 allowances for Cyprus and 6,196,500 allowances for Poland. For Poland this adjustment was fully done in 2015. For Cyprus, taking into consideration the aforementioned adjustment and the 2015 and 2016 volumes withheld for the purposes of back-loading, no allowances are auctioned in 2015 nor 2016, and 246,644 allowances withheld in 2017.
Pursuant to Article 1(2) of Decision (EU) 2015/1814 (MSR Decision) of 6 October, the 900 million allowances withheld for the purposes of back-loading will be placed directly into the Market Stability Reserve.
The Commission's estimated amount determined in Recital 26 of the Decision 2013/448/EU of 5 September 2013 (NIMs Decision) takes into account all allowances handed out for free, including those for planned modernisation investments in the electricity sector in 8 Member States, and is based on the carbon leakage list valid at that moment. Pursuant to Article 1(3) of Decision (EU) 2015/1814 (MSR Decision) of 6 October 2015, any volumes arising from the reason listed in ninth subparagraph of Article 10(2) of the Auctioning Regulation (so-called "unallocated allowances") will be placed directly into the Market Stability Reserve.
In accordance with the Auctioning Regulation and as further specified in the resulting contracts, any difference between the volumes determined in the auction calendars and the figures determined according to Article 10(1) of the ETS Directive, due to the estimation or the withholding of allowances for certain States, is added to the volume to be auctioned in the subsequent year.
The volumes that were foreseen for free allocation pursuant to Article 10c of the ETS Directive that were not allocated in previous years by the Member State concerned (for example if investments set out in the national plan and justifying the allocation have not been carried out) are to be auctioned. Accordingly, the volumes as notified by the Member State concerned are added to the auction calendar of the following year, as of 2015.
The allowances to be allocated for free to small emitters reintroduced into the ETS pursuant to Article 27 of the ETS Directive are deducted from the respective Member State's auction volume, as notified by the Member State and included in the respective National Allocation Table, as of 2017.
The amount to be auctioned or withheld each year per Member State/EEA-EFTA State is rounded down to a multiple of 500 allowances per state; the remaining amount is carried over to the next year.
Accordingly, the volumes for 2019 onwards are indicative and the final volumes depend on adjustments related to free allocation, re-introductions of small emitters pursuant to Article 27 of the ETS Directive, retained or carryover volumes. A precise calculation is made each year, which is published by the auctioning platforms through the auction calendars, which are the only valid documents with definitive volumes to be auctioned per year.

Aviation allowances

15% of the EU aviation allowances for the third trading period are to be auctioned pursuant to Article 3d of the ETS Directive. The Auctioning Regulation further specifies in Article 12(1) and (2) that the volumes to be auctioned each year shall be 15 % of the expected volume of aviation allowances in circulation for that year. In case the auctioned volume for a given year is more or less than 15% of the volume actually put into circulation for that year, the volume to be auctioned in subsequent years is corrected for the difference. Legal reference: Articles 12(1) and (2) of the Auctioning Regulation for the corrections between expected and actual issuances.

The volume of aviation allowances to be auctioned is further determined in accordance with the derogations provided in Decision No 377/2013/EU and Regulation (EU) No 421/2014, and on the basis of the final number of aviation allowances put in circulation for 2012 as well as of an estimate of the number of aviation allowances to be handed out for free for 2013 to 2016. Regulation (EU) 2017/2392 of 13 December 2017 provides for pursuing the aforementioned derogations until 31 December 2023.

In 2012, 2.5 million aviation allowances were auctioned prior to Decision No 377/2013/EU (stop-the-clock-decision) and the auctions were resumed in 2014 with a volume of 9.2 million, followed by 16.4 million in 2015. In 2016, 5,997,500 aviation allowances were auctioned, based on an estimate of expected aviation allowances in circulation for 2016 established on the basis of the National Aviation Allocation Tables at the times of determining the calendar and a positive correction of 343,350 aviation allowances for 2013 and 2014 pursuant to Articles 12(1) and (2) of the ETS Directive.

For 2017, 4,730,500 aviation allowances were auctioned. This volume was calculated in accordance with the ETS Directive and in line with the Commission proposal reviewing the scope of the EU ETS for aviation COM(2017)54, which takes into account the outcome of the 2016 ICAO Assembly and was adopted by Regulation (EU) 2017/2392 of 13 December 2017.The calculation of the 2017 auction volume was based on the aviation allowances issued for free for 2017, and took into account the allowances issued from the special reserve to new and fast growing aircraft operators, as well as corrections for previous years (as of 1 May 2017).

For 2018, 5 601 500 aviation allowances will be auctioned. The calculation is based on the aviation allowances expected to be issued for free for 2018, including from the special reserve. No corrections according to Article 12 of the Auctioning Regulation will be done, since corrections for previous years up to 1 May 2017 were already accounted for in the 2017 volumes, while subsequent corrections up to 1 May 2018 will be accounted in the 2019 auction volume.

The volume of aviation allowances for the EEA-EFTA States is withheld pending the start of auctions for these States, corresponding to a cumulative amount of 1 555 693 aviation allowances for the period 2012-2018.

For further information on the aviation activities in the EU ETS see also the information related to Aviation and the ETS, including documentation and FAQ The auction calendars with exact dates and volumes of allowances to be auctioned in the current year are published by the auction platforms.

For further information on the aviation activities in the EU ETS see also the Questions & Answers on the proposal to temporarily 'stop the clock' under the EU's Emission Trading System (EU ETS) for flights to and from European airports and the Frequently Asked Questions on the 2013-2016 Regulation amending the EU Emissions Trading System for aviation.

The auction calendars with exact dates and volumes of general allowances and aviation allowances to be auctioned in the current year are published by the auction platforms:

ICE
EEX

How many allowances will each Member State have for auctioning?

General allowances

All allowances which are not allocated free of charge are auctioned. Pursuant to Article 10(2) of the ETS Directive, 88% of the allowances for auctioning are distributed to Member States on the basis of EU ETS emissions in 2005 or the average of the 2005-2007 period, whichever is the highest. 10% of the allowances are distributed to poorer Member States to take account of the lower GDP per head and higher prospects for growth and emissions. Another 2% of the allowances are distributed to nine Member States which in 2005 had achieved a reduction of at least 20% in greenhouse gas emissions compared with the reference year set by the Kyoto Protocol.

For some States, the administrative steps to allow auctioning of the allowances were not completed on time, and the expected volumes were withheld and included in the volumes to be auctioned in subsequent years. This concerned some Member States as indicated in the table below and currently concerns the EEA-EFTA States.

The table below gives an overview of the dates as from which the Member States and EEA EFTA States started auctioning phase 3 allowances:

Member/EEA EFTA State	Date
Germany	As from 26 October 2012
UK	As from 21 November 2012
Austria, Bulgaria, Finland, France, Italy, Latvia, Romania, Slovenia, Slovakia, Spain and Sweden	As from 13 November 2012
Netherlands	As from 20 November 2012
Cyprus, Lithuania Luxembourg, Portugal	As from 27 November 2012
Greece	As from 4 December 2012
Hungary, Malta	As from 11 December 2012
Denmark	As from 18 December 2012
Estonia, Belgium	As from 7 January 2013
Ireland	As from 18 February 2013
Czech Republic	As from 18 March 2013
Poland	As from 16 September 2013
Croatia	As from 8 January 2015
EEA EFTA states	pending

Aviation allowances

Information can be found in the section Reducing emissions from aviation.

The auction calendars with exact dates and volumes of general allowances and aviation allowances to be auctioned per Member State in the current year are published by the auction platforms:

ICE
EEX

When and how often allowances are auctioned?

General allowances

Auction platform	States	Details
EEX	Participating Member States	Weekly auctions on Mondays, Tuesdays and Thursdays
EEX	Germany	Weekly auctions on Fridays
ICE	United Kingdom	Fortnightly auctions on Wednesdays, alternating with auctions for Poland
EEX	Poland	Fortnightly auctions on Wednesdays, alternating with auctions for the United Kingdom

Aviation allowances

Information on the timing, frequency and volume per auction are published by the auction platforms through the auction calendars in due time before the start of the auctions.

Where can data on the auctions be found?

The auction calendars with exact dates and volumes of general allowances and aviation allowances to be auctioned per Member State in the current year are published by the auction platforms. Further, they publish information on the auction results after each auction:

ICE
EEX

The auction reports published pursuant to Article 10(4) of Directive 2003/87/EC include further details on the auctions for the 25 participating member states, Poland, the United Kingdom and Germany.

How many auction platforms are auctioning allowances?

The Auctioning Regulation provides for a common auction platform but gives Member States the possibility to opt-out and appoint their own auction platform. Germany, Poland and the UK have made use of this option.

At present, two platforms are auctioning allowances under the Auctioning Regulation:

European Energy Exchange (EEX) in Leipzig is the common auction platform used by 25 Member States, following a procurement procedure jointly with the Commission; EEX also serves as Germany’s opt-out auction platform;
ICE Futures Europe (ICE) in London is the United Kingdom’s opt-out auction platform.

Poland also intends to appoint an opt-out auction platform but is using the common auction platform in the meantime.

The EEA-EFTA States will auction on the common auction platform as well.

An overwhelming majority of stakeholders, a large majority of Member States and the Commission's impact assessment supported a single EU-wide auction platform as it would best meet all objectives laid down in the revised EU ETS: it is most cost efficient, most transparent, best ensures respect of the principle of non-discrimination, and offers the greatest level of harmonisation and predictability as compared to auctioning through two or more parallel national auction platforms.

Opt-out auction platforms must conform to the framework set out in the Auctioning Regulation, which provides for further rules to ensure adequate coordination between the opt-out auction platforms and the common auction platform.

The maximum appointment duration for any auction platform is five years. EEX was appointed as the transitional common auction platform for three years. The contract was, renewed for one additional year, until August 2016. In July 2016, following a joint procurement procedure with the Commission and the participating Member States, EEX was re-appointed as a common auction platform for a period up to five years.

EEX has also been contracted as Germany’s platform. Its first appointment was until December 2013; its second appointment runs for three years, renewable for a further two years; in May 2016 the contract was extended to November 2018. ICE was contracted in November 2012 as the UK’s platform for three years, renewable for two years more; in March 2015 the contract was extended to November 2017.

Since the coexistence of the common auction platform and the opt-out auction platforms inevitably implies less than full harmonisation of the auction process, the arrangements put in place under the Auctioning Regulation will be reviewed in the light of the report on the auctions performed in 2014. The review of the Auctioning Regulation will be carried out in consultation with Member States and stakeholders.

Questions and Answers: Auctioning and its regulation

What will change after 2020?

In the context of the 2030 climate and energy framework European leaders decided in October 2014 that free allocation will continue after 2020 to prevent the risk of carbon leakage due to climate policy, as long as no comparable efforts are undertaken in other major economies, with the objective of providing appropriate levels of support for sectors at risk of losing international competitiveness. However, the share of allowances to be auctioned will not decrease.

Member States with a GDP per capita below 60% of the EU average may opt to continue to give free allowances to the energy sector up to 2030. However, the maximum amount handed out for free should be limited and the current modalities, including transparency, improved to ensure that the funds are used to promote real investments modernising the energy sector, while avoiding distortions of the internal energy market.

In terms of Member States' shares in the auctioning volume, 90% of allowances to be auctioned will be distributed among all Member States on the basis of verified emissions. The rest will be distributed among those countries whose GDP per capita did not exceed 90% of the EU average (in 2013) for the purposes of solidarity, growth and interconnections.

Why are allowances being auctioned?

With the start of the third trading period in 2013, auctioning is progressively replacing free allocation as the main method for allocating allowances to all EU ETS sectors except aviation. This best ensures the efficiency, transparency and simplicity of the system and creates the greatest incentive for investment in a low-carbon economy. Auctioning will also eliminate windfall profits, which arise when operators charge their customers the cost of allowances they have received for free.

Why is an Auctioning Regulation necessary?

The revised EU ETS Directive adopted in 2009 required the European Commission to adopt a Regulation on the timing, administration and other aspects of auctioning to ensure that auctioning is conducted in an open, transparent, harmonised and non-discriminatory manner. This must support the overarching aims of the revision of the EU ETS, namely greater efficiency of the system, more harmonisation, avoidance of distortion of competition and greater predictability. All these objectives would be at risk without appropriate rules.

The importance of these rules is underpinned by their legal form: a Regulation is the strongest form of EU legislation and its rules are directly applicable in all Member States.

The Auctioning Regulation was adopted by the Commission on 12 November 2010.

How do the auctions work in practice?

The auction format is a single-round, sealed bid, uniform price auction. This is a simple auction format that facilitates participation, including by SMEs and small emitters covered by the ETS Directive.

During a single bidding window of the auction, bidders can place any number of bids, each specifying the number of allowances they would like to buy at a given price. The bidding window is open for at least two hours. Directly following the closure of the bidding window, the auction platform determines and publishes the clearing price at which demand for allowances equals the number of allowances offered for sale in the auction concerned.

Successful bidders are the ones who have placed bids for allowances at or above the clearing price. All successful bidders pay the same price, regardless of the price they specified in their bids.

Articles 7(8), 9 and 32(5) of the Auctioning Regulation define provisions on cancellation of auctions and spreading of the corresponding volumes over subsequent auctions so as to ensure a predictable and smooth repartition of any volumes from cancelled auctions without significant increases of individual auction volumes.

In this respect, should a cancellation occur for an auction which is not consecutive to previous cancellation(s) but already includes adjustments from such cancellation(s), the spreading of the volume cancelled in line with the aforementioned provisions would take place as from the first auction which is not subject to other adjustments due to previous cancellation(s).

What products are auctioned?

The Auctioning Regulation provides for allowances to be auctioned in the form of spot products, which means delivery within a maximum of five working days after the auction. The auctioned product may or may not be a financial instrument in the meaning of the EU regulatory framework for markets in financial instruments. The products auctioned by EEX and ICE are not such financial instruments; exact product specifications are available on the auctioning webpages of EEX and ICE.

Spot products have been chosen for their simplicity and because, unlike futures, they do not lock in the trading of the auctioned allowances to the auction platform(s), which could have a potentially negative impact on competition between trading places in the secondary market.

Who can bid in the auctions?

Auctions are held by auction platforms appointed by national governments but each auction is open to buyers established anywhere in the EU and the EEA-EFTA. The following are eligible to apply for admission to bid in the auctions:

ETS operators and aviation operators, and their parent, subsidiary or affiliate undertakings.
Business groupings of operators or aircraft operators acting as an agent on behalf of their members. The concept of "business grouping" requires the existence of a multi-lateral legal relationship between several ETS operators and/or aircraft operators such as a partnership, joint venture or association of such operators and/or aircraft operators. The business grouping must have its own (incorporated or unincorporated) legal identity and statute which clearly indicates that the business grouping is controlled by ETS operators and/or aircraft operators. For bidding in the auctions directly on its own account and acting as an agent on behalf of its members, the business grouping could employ the services of in-house or outside traders who must be natural persons acting as the bidder's representative.
Public bodies or state-owned entities that control ETS operators or aviation operators.
Investment firms and credit institutions authorised and regulated under EU law. Once admitted, they can bid on their own account. They may also bid on behalf of clients provided that they are authorised to do so by the national competent authority. Such authorisation must be valid with respect to the auctioned products which, as currently auctioned by EEX and ICE, do not constitute a financial instrument under EU legislation for financial markets. Information on the implementation by Member States of the provisions in the Auctioning Regulation concerning the requisite authorisation can be found in this notice.
Persons exempt from the authorisation requirements in EU financial law because their trading and investment services activities are only ancillary to their main business (Article 2(1)(i) of Directive 2004/39/EC), but who are authorised under national legislation implementing the rules laid down in the Auctioning Regulation. As is the case for investment firms and credit institutions, they may also bid on behalf of clients provided they are authorised by the national competent authority to do so. Information on the implementation by Member States of these provisions can be found in this notice.

Where investment firms, credit institutions or exempt persons bid on behalf of their clients, they shall ensure that those clients are themselves eligible to apply for admission to bid, i.e. are included in one of the categories above.

See Article 18 of the Auctioning Regulation for the precise wording on the above.

Unauthorised brokers are not eligible to apply for admission to bid, but could play a role in facilitating the formation of business groupings. An interesting and relatively easy business opportunity for a broker might be to form a European Economic Interest Grouping (EEIG) made up solely of operators and/or aircraft operators. This is a relatively cost-effective means of establishing a business grouping under EU law allowing for cross-border membership. Such an EEIG could then apply to be admitted to bid directly in the auctions and could appoint traders employed by the broker to act as their bidder's representative within the meaning of Article 6(3) of the Auctioning Regulation.

Neither the auctioneer nor the auction platform or its staff may apply for admission to bid.

The auction platform must consider each application for admission in order to prevent auctions being used as a vehicle for money laundering, terrorist financing, criminal activity or market abuse. The auction platform must carry out customer due diligence checks. Complete information on the admission process and criteria can be found on the websites of EEX and ICE.

The Auctioning Regulation thus strikes a balance between the objectives of openness, effective competition and mitigating the risk of money laundering, terrorist financing, criminal activity or market abuse.

How do bidders access the auctions?

Once admitted, bidders are able to access the auctions through the internet. The auction platforms also offer dedicated connections. EEX, furthermore, offers a possibility to submit bids by fax. Complete information on the means of access can be found on the websites of EEX and ICE.

How can SMEs and small emitters access the auctions?

SMEs covered by the EU ETS as well as small emitters can access the auctions directly after going through the due diligence checks. They may also access the auctions through an intermediary or form a business grouping to act as an agent on their behalf. This may offer them the advantage of minimal transaction costs as well as certainty on the price and quantity of allowances they wish to receive.

The design of the auctions has been made as simple as possible to facilitate participation by SMEs. For example, all successful bidders pay the same clearing price so that SMEs and small emitters will not be disadvantaged by having less knowledge than larger participants.

Both EEX and ICE have measures in place to facilitate access for SMEs covered by the EU ETS, as well as for small emitters.

Who is the auctioneer? What is its role?

Each Member State appointed an auctioneer to be able to auction its share of allowances. The auctioneer is responsible for offering the allowances to be auctioned to the auction platform on behalf of the appointing Member State. It also receives the auction proceeds and disburses these proceeds to the appointing Member State.

The auctioneer may be a private or public body. A list of auctioneers can be found under the Documentation tab at the top of this page.

What type of organisation is the auction platform?

The auction platform must be a regulated market authorised under EU financial markets legislation.

Regulated markets have been chosen because they are bound by EU law (the 'Markets in Financial Instruments' Directive and the 'Market Abuse' Directive) to provide a number of safeguards in the conduct of their operations. These safeguards include, among others, arrangements to identify and manage the potential adverse consequences of any conflicts of interest, to identify and manage risks that the market is exposed to, and to have transparent and non-discretionary rules and procedures for fair and orderly trading.

How does the Regulation ensure fair and orderly auctioning?

Fair and orderly auctioning is ensured, firstly, by provisions in the Auctioning Regulation on access to the auctions and on the determination and publication of the auction calendars. The auction platform is obliged to ensure that appropriate ‘know-your-customer’ checks are carried out before it grants admission to any potential bidder.

Secondly, the auction platform must be a regulated market, which ensures that it meets strict standards and will be supervised by the competent national authority for financial markets of the Member State in which it is located.

The Auctioning Regulation includes detailed provisions to mitigate the risk of anti-competitive behaviour. Depending on the product auctioned, the auctions will be covered either by the Market Abuse Directive or by detailed provisions that provide equivalent protection.

Finally, in order to ensure fair treatment of clients, the Auctioning Regulation lays down an authorisation requirement and rules of conduct for intermediaries in case they are not covered by the rules of conduct provided for in the EU Financial legislation. It is, however, optional for Member States to put in place a legal framework for the authorisation of such intermediaries.

More information on carbon market oversight is available on the page 'Ensuring the integrity of the European carbon market'.

Will there be an independent monitor of the auctions? How will it be chosen? What will its role be?

The Auctioning Regulation provides for a single independent auction monitor for all auctions on all auction platforms, to be chosen through a competitive procurement procedure conducted jointly by the Commission and all Member States.

The Auctioning Regulation foresees an integral role for the auction monitor in the oversight of the auctions. Each month, it is to submit a report to Member States and the Commission on all auctions conducted that month. It is to produce a consolidated annual report on the functioning of the auctions, including any evidence of anti-competitive behaviour, market abuse, money laundering, terrorist financing or criminal activity, and the impact of auctioning on the secondary market for allowances. Non-confidential versions of these reports will be published on the Commission's website.

The single auction monitor may also be asked to prepare ad hoc reports on a specific issue relating to auctioning. Furthermore, in light of a suspected breach of the regulation by an auction platform, the single auction monitor must draw up a report stating the nature of the breach, making recommendations to remedy the situation and, if appropriate, recommend the suspension of the auction platform.

Two procurement procedures were launched in 2012 and 2013 respectively, but the contract could not be awarded. The Commission and the Member States are currently assessing their options.

Who will supervise the auctions? How will this be done?

Auctions and auction platforms are supervised at various levels:

supervision of the organisation and conduct of auction platforms;
supervision of the organisation and conduct of professional intermediaries bidding on behalf of clients;
supervisions of transactions to prevent market abuse;
supervision of transactions to prevent money laundering and terrorist financing.

These different layers of supervision are interlinked and complementary.

Authorisation and supervision of an auction platform rests with the competent national authorities of the Member State in which an auction platform is located. The rules that apply to an auction platform's organisation and conduct are those of the Markets in Financial Instruments Directive (2004/39/EC) and of the Auctioning Regulation.

Professional intermediaries like investment firms, credit institutions or other persons authorised to bid in EU ETS auctions on behalf of others are also licensed and supervised by the relevant national (typically financial) authorities of the Member State where they are located. When bidding on behalf of clients in the auctions, such intermediaries have to abide by the rules set out in the Auctioning Regulation and/or in Directive 2004/39/EC.

Rules against market abuse, set out in the Auctioning Regulation and in the Market Abuse Directive (2003/6/EC), apply to behaviour and transactions of any bidder in the EU ETS auctions. On-going supervision in this area is primarily left to competent authorities of the Member State where an auction platform is located, but competent authorities of other Member States are also empowered to act and their involvement may be indispensable in cross-border investigations and enforcement.

The Financial Intelligence Unit (FIU) in the Member State where the auction platform is located is the competent national authority for combating money laundering and terrorist financing. It is responsible for supervising the auction platform and must ensure compliance of the auction platform with its obligations under the Auctioning Regulation in relation to customer due diligence, the monitoring and record keeping of the relationship with the bidders, surveillance of the auctions, and related notification requirements. The FIU in the Member State where the auction platform is located cooperates with other FIUs through the FIUs Platform and with the national law enforcement authorities in order to effectively prevent and sanction money laundering and terrorist financing, in accordance with Directive 2005/60/EC.

In addition, once appointed, the auction monitor will monitor and report to Member States and the Commission on the functioning of all auctions on all platforms, on the compliance of the auction processes with the objectives of the ETS Directive and the provisions of the Auctioning Regulation and on any evidence of anti-competitive behaviour or market abuse.

The supervision by the competent authorities and the auction monitor is without prejudice to the obligation on the auction platform to survey the auctions itself.

Who will pay for the auction process and the single auction monitor?

The costs of the auction process, including the costs of setting up the technical infrastructure, the actual conduct of the auctions and carrying out due diligence checks on bidders, will in general be paid for by the bidders through the fixed and variable fees they pay to an auction platform to participate in the auctions.

The costs of the single auction monitor will be deducted from the auction proceeds and will be borne by the Member States.

Is it foreseen to review the Auctioning Regulation in the light of experience?

Yes, the Auctioning Regulation will be reviewed following the annual auctioning report for the year 2014.

The review will be carried out in consultation with Member States and stakeholders. The Commission will put forward any measures deemed necessary to deal with any distortion or malfunctioning of the internal market or the carbon market arising from the arrangements under the Regulation with a view to their entry into force by 31 December 2016.

This does not preclude the findings of a wider, ongoing work stream pursuant to Article 12(1a) of the ETS Directive, which is examining whether the EU ETS allowances market is sufficiently protected from market abuse. This work is also concerned with organising the oversight of the European carbon market and securing the market integrity of auctioning and trading.

Were the opinions of stakeholders considered in the drawing up of the Auctioning Regulation? Has the Commission prepared an impact assessment?

Yes, all information on consultations held and on the Commission's impact assessment can be found on the consultation page.

Do other countries running cap and trade systems also auction allowances?

Yes, several other countries and regions auction allowances under emission trading schemes other than EU ETS, or are considering doing so. Further information can be found in the ICAP report. The annual volumes to be auctioned under the EU ETS are by far the largest, however.

Questions and Answers: Joint procurement of the single auction monitor and the common auction platform

Where can information on the procurement procedures for the common auction platform or the auction monitor be found?

Contract Notices are always published on Tender Electronic Daily (TED), the electronic version of the supplement S to the Official Journal of the European Union. Full tender documents are made available on DG CLIMA's contracts and grants page.

The Commission has published a notice on the Member States' implementation of the Auctioning Regulation and on transparency measures with regard to the documents relating to the call for tenders. As set out in this notice, the Commission may publish draft tender documents in order to ensure maximum transparency and equal treatment during the procedure. The publication of such drafts does not constitute publication or advertising within the meaning of Article 103(1) of the Financial Regulation nor Articles 123, 124 and 125 of the Rules of Application. Any part of such drafts may be changed; the drafts are not binding on the Commission or the Member States taking part in the joint procurement. Only the notices and associated documents relating to the call for tenders published in the OJ shall be authentic.

The Commission is the sole contact point for candidates and tenderers. An nformation note sets out the rules for contacts with economic operators on matters pertaining to the joint procurement procedures.

The Contract Notice for the first common auction platform was published in OJ 2012/S 59-095297 of 24 March 2012, and the full tender documents are available on DG CLIMA's contracts and grants page.

The Prior Information Notice for the second common auction platform was published in OJ 2014/S 118-208551 of 21 June 2014. The Contract Notice for the second common auction platform was published in OJ 2014/S 211-372946 of 1 November 2014, and tender documents are available on DG CLIMA's contracts and grants page.

Two procurement procedures for a procurement of the auction monitor were launched in 2012 and 2013 respectively, but the contract could not be awarded. More information can be found on the contracts and grants webpage.

What is determined in the joint procurement agreements?

Two joint procurement agreements between the participating Member States and the Commission are in force, one for the procurement of the common auction platform and the other for the auction monitor. The agreements lay down the modalities for the conduct of these procurement procedures jointly by the Member States and the Commission.

Among other things, they provide that:

The Commission arranges the overall orientation, preparation and organisation of the joint procurement procedures;
The Commission is the sole representative towards third parties and provides administrative support in the course of the joint procurements and the resulting contracts;
The Member States, represented in a Joint Procurement Steering Committee (JPSC), provide steering input. Main decisions, notably the adoption of tender documents and award decisions, require prior approval by the (participating) Member States through qualified majority vote in the JPSC.
Opt-out Member States may be given observer status in the procurement of the common auction platform(s) if they sign the Joint Procurement Agreement for the sole purpose of being able to make use of the auction platform(s) appointed pursuant to Article 26(1) and (2) of the Auctioning Regulation, in the absence of any listing of their own auction platform(s) in Annex III of the same Regulation.
The Joint Procurement Agreement foresees a Contract Management Committee consisting of representatives from the Commission and the Member States to manage the contracts with the common auction platform(s) and the single auction monitor.

The procurement procedures themselves are conducted pursuant to the procurement rules in the Financial Regulation, which is the legal basis for procurement procedures carried out by the Commission.

Opt-out auction platforms

What is the procedure for approving opt-out auction platforms?

After determining the details of its intended auction platform through a procurement procedure, a Member State opting out of the common auction platform(s) notifies its plans, including all relevant details, to the Commission. The Commission verifies that the auction platform satisfies the rules of the Auctioning Regulation and the objectives of the ETS Directive, and to determine whether obligations or conditions could be required for ensuring adequate coordination between the different auction platforms.

If the Commission is satisfied that the opt-out platform respects the rules and can be expected to achieve the objectives of the ETS Directive, it puts forward a draft amendment of the Auctioning Regulation to list the opt-out platform in an Annex to the Regulation. The adoption of this amendment follows the same procedure as the adoption of the Auctioning Regulation itself, including an opinion by the Member States represented in the Climate Change Committee, followed by a three-month scrutiny period for the Council and the European Parliament. The opt-out platform can start conducting auctions only when the amendment to list it has entered into force.

Under this procedure, EEX has been listed twice as Germany’s opt-out auction platform and ICE as the UK’s. Poland has yet to procure and notify its platform and is in the meantime auctioning on the common auction platform.

What happens to the allowances in question, in the absence of the listing of an opt-out auction platform?

In the absence of an opt-out auction platform being listed, the Member State concerned has to auction its share of allowances on the common auction platform, so as to ensure that the envisaged volume of allowances comes to the market as foreseen in the Auctioning Regulation. Pursuant to this rule, Poland had entered into a contract with EEX as transitional common auction platform and EEX started auctioning for Poland as of 16 September 2013. The continuation of the auctions for Poland is subject to the conclusion of bilateral arrangements between EEX and Poland.

Can a Member State give preferential treatment to its own industry? How is respect of the principle of non-discrimination ensured?

No, Member States cannot give preferential treatment to their own industry. All auction platforms must give all eligible bidders equal access to auctions and no preference can be given to companies registered in any particular Member State. The provision that any auction platform must be a regulated market helps to ensure that all participants are treated in a fair and non-discriminatory way.